To be terrified about mortgage

[melodypondisasuperhero]

We finally managed to get our first mortgage last year and now this is happening. Our rate is 3.09% which runs out in August, currently the follow-on rate is 5% but I imagine this will go up several times before the end of the fix. We could manage 6%, probably just about 8%, but any higher than that and I really don’t know.

AIBU to be terrified? Or am I missing something?

Is it normal to fix for 2 years on a first mortgage? Genuine question I've never known anyone do that

Anyway, how soon can you start looking at fixing further?

No, you're rightly terrified - I'm shitting it as we can probably manage 4.5% but anything above that is going to cripple us

A decent broker will check you’re still comfortable at affording 10% before arranging lending.

August is still some time away and (other than the doomsdayers), no one can accurately predict what may happen by then. Don’t spend the next 11 months stressing.

What is the LTV ?

Of course it's normal.

OP you can buy a rate now to come into affect in 6 months time- by that time your early repayment charges (given you will be c. 5 months from expiring) should be quite low to exit your current fix early. Find a mortgage broker to start the process

You're not alone OP. We have a sizeable mortgage that takes careful budgeting, which is due for renewal in June. I'm bricking it.

Look to buy a rate now!

@GasPanic LTV currently about 85% of purchase price
@OnlyFoolsnMothers Thank you, we’ve contacted the broker we used originally to find out what our options are, I’ll ask about that

Yeah, not great is it. What angers me the most is the situation for first time buyers and people that need more space/remortgaging, how is anyone supposed to do it? This situation I fear will do nothing but make plenty of people default, forcing them into the rental market - where by the way, nothing is cheap and properties are often of substandard quality. 1 in 5 private rentals are under environmental health monitoring - think that says enough. One of my close friends is buying a new build that won’t be ready until next year and their mortgage offer expires soon, if they can’t get another, then what, sale falls through? It’s awful.

Look at redemption penalties - if might be better to break your current mortgage and try and fix for 3-5 years. Expensive but for some people it might be better over the longer period if you think that mortgages might stay a higher rate for a number of years. And at least you know what you will be paying for longer and have some security in that respect.

We are also bricking it since we are stuck with fantasy fucking economics for another two years and this sort of damage to our economy will take years after that to recover from.

A decent broker will check you’re still comfortable at affording 10% before arranging lending.

a) That isn’t true
b) That isn’t helpful

Aye it’s a scary world atm. Our five year fixed rate has just ended, the new rate has put our payment up by £120pm, manageable for us but I appreciate we’re one of the lucky ones.

Our 5 year fixed runs out next August.

I really don't know what we are going to do.

Yeah we stress tested our mortgage… all fine.
Since then our energy bills have increased hugely. Childcare bill has increased by 20%. Food shopping has increased, everything has increased. The stress test we undertook 2 years ago is less relevant now.

It is totally shit but it is limited what you can do about it

As others have said, look into if it is worth buying yourself out of your current fix and securing a longer one now but I think that horse may have bolted

Lenders have already pulled some rates - when they come back the are likely to be eye watering compared to what we’ve all come to take for granted

I didn't know you could do this. Our 10 year fix ends in November 2023. I might call them and see when I can move to a new deal :)

You can probably already move, it tends to be 3 months before.

Look at your early repayment charges and check how much the mortgage would need to increase by to make paying them viable. Other than that what is the term of your mortgage? If monthly repayments go up so much that you can't afford them you may be able to extend the term of your mortgage to bring the monthly repayments down.

YANBU. My fixed rate ends next August and I’m dreading how much it’s going to go up by. We’re trying to overpay as much as we can now to minimise the interest.

Sorry if this is a stupid question but is the exit fee from the fixed term the same as the fee for repaying your whole mortgage early? Because I’ve just had a look and that sum is eye-watering.

I assume it runs out next August.

Well the bad news is I think you are right. No one has a crystal ball and knows exactly where rates are going but my guess is that there is a good chance they are heading into the zone where they may cause you issues.

The good news ? Well you've got a year to prepare for it, and that is a long time. Obviously there is a long list of stuff you can do to save money and get a cushion as well as think about what possibilities you have to increase your income.

As regards mortage advice, TBH I have none to give, but you might think about trying over on MSE forum, which is a specialist forum for money and savings and my gut feeling is that there will be a lot more people on there with expertise and the ability to contribute. Good luck.

You can normally apply for a new deal at least 3 months in advance, and some 6. So you'd be wise to get that process going now (and then obviously you get the rate for the product you apply for now).

She is more than a year out, she can't start the process

I am very worried too, already cutting back on other things also