Can you cope with 6/7% interest rates when your mortgage expires?

[onthefencesitter]

www.bankofamerica.com/mortgage/mortgage-rates/

American interest rates are at that level now and given the level of tax cuts that are going to be implemented, I think we would be at 6/7% at least by next year, perhaps even 8%

Vote YABU for no.
Vote YANBU for yes

@HangerLaneGyratorySystem oic, I thought you are on a fixed rate deal.
as variable rates are much higher than the fixed rate, why would you choose it?
any benefit?

Our fixed rate ends in December so we agreed to a new 5 year fixed rate yesterday (3.9%) it's an extra £200 a month which is affordable but we will have to make a few cut backs. In 5 years time both kids with be in school so childcare bills will have reduced and I will be able to increase my working hours if I have to.
We had planned to increase our mortgage to pay for an extension but it got put on hold due to the long wait for building materials during COVID - im glad we didn't manage to do it.

We've got a fix for another 4 years and have enough to pay the whole thing off at the end of it if necessary. However, that money was earmarked for extensions/improvements so it would mean scrapping these. We'll need to sit down with a cup of tea and have a proper discussion soon, I think.

I’ve advised DD to fix for 10 years at 4% when she comes to remortgage next month, if Nationwide are still offering it - she will have more equity after 2 years so she shouldn’t be paying any more than she is currently, which was 3.75% on 90% ltv. It’s a gamble but I don’t see rates coming down any time soon, 5% is the historic average I think. She’s ‘lucky’ her fix ends soon as another year would be disastrous. She (along with her partner) already pays £1250 a month.

What if she wants or needs to move during that time? Port it over?

My DH and I are prioritising overpaying our remaining mortgage. We are very lucky, it's super small. £19.5k over 8 years. We are hoping to clear it before our 5 year fix is over in 4.5 years.

We wouldn’t manage 8% but could stretch the term as it’s currently 13 years and we’re in our late 30s so would have to push it to 20+ and get it paid off later than hoped.

They shouldn’t ever need to move but, yes I suppose they would port it.

My mortgage has 7 years to run but after the 1% fix ends in 2027 we will (hopefully) pay off the balance, which will be under £10k.

Thank you fenceSitter that is interesting and yes, good point Jgw!

@MelvinThePenguin 👍🏼

I’ve advised DD to fix for 10 years at 4% when she comes to remortgage next month, if Nationwide are still offering it - she will have more equity after 2 years so she shouldn’t be paying any more than she is currently, which was 3.75% on 90% ltv

Will she have more equity in 2 yrs on 90% LTV? I think the next few yrs are going to be the toughest personally.
We fixed for 5 as porting can be expensive & ideally we will move but if we wanted to stay would have gone with 10 yrs.

@Furries @GardenGuardian Thanks for explaining.

now I have an idea come up.
if one mortgage is at a high rate, then I would have a second mortgage in a low rate (when it go down). and use that money to do overpayment for the 1st mortgage.

This is what my worry is for DD and her partner and Step son. Actually for everyone with mortgages. I really hope not but what's to say it won't?

How are you going to secure 2 mortgages against the same asset?
Your first mortgage company would insist on having first charge on the property, and the second lender wouldn’t lend on that basis.
Obviously depends on the actual numbers and LTV, but in general - that’s not going to work.
And that’s before you get into a affordability and being approved for the second mortgage.

We moved within our fixed rate period to somewhere more expensive and just added a second part of the mortgage, I don’t think it cost anymore, they run on different terms, I think the newer bit is a slightly lower rate.

Issue would be more if someone was downsizing in future, or needed to sell because they split up, or had to sell because they could no longer afford it. (I think, not an expert).

@CherryRipe1 I will give you £100 if they do. For that to happen we are talking serious economic disaster. Look at inflation now, the value of stirling & what the rates are & how slow the bank has been to lift them.

Thankfully yes

But then again we had a high interest rate when we fixed 8 years ago so it's not that much of an increase for us

having said this was my view before Liz Truss poured fuel on the fire 😆

If you port and downsize on a fixed rate so your mortgage is smaller than the original loan you’d pay the ERC on the difference.

so you have £100k originally and reduce to £75k you pay the ERC on the £25k you’re effectively paying back early. (Most lenders possibly not all but I’ve not come across one as yet)

People like to refer to that (often Boomers in a smug way, though I appreciate that’s not you here!)

The 15% rate wasn’t the 90s, it was the BofE rate right at the start of the 90s and plummeted through the decade. The 15%s were periodic through the 80s, and short term - although the average was still high, it doesn’t fit with the Boomers who claim it was 15% all the way.

There are a lot of fixed rate mortgages available now. You have to realise that fixed rate mortgages were only introduced in 1989, at the end of a tumultuous decade of interest rates. (just in time for a sustained decade of falling rates!)

So the people (I was one) who saw 15% at some points really were at the mercy of that. Your daughter has the option to fix for 10 years at a rate not much higher than a shorter term. She also has a history of volatility to inform her decisions - like also not going to the wire on her mortgage, and making over payments. It’s a very different financial landscape than the 80s.

There's no way we could manage an increase, especially with the energy prices as they are.
We very fortunately fixed for 10 years at 2.09 earlier in the year just before rates went up.

So many things that I never expected have happened in the last 2+ years that I don’t bank on anything anymore, particularly with an utterly incompetent government.

It would increase our mortgage by more than £800 a month, and whilst we could pay it we would struggle and even a slight rise in anything else would send us broke.

But selling/downsizing would be pointless as even smaller houses in our area are selling now for what we bought this house for in 2021.

Im hoping it wont go that far. We could meet a rise of £200‐£500 a month.

I ok with it. I would like to know there are many people richer than me, who earn much more than me. It encourages me to do better, to motivates me to work hard and earn more.
and really good to know some people are able to afford a better house but choose not to. only spend 1/5 income or lower on the mortgage. make me think a lot.