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?

@seetzeros we can all only speak as we find my experience is of Birmingham and London. My cousin was allocated her last council house in 2015 (Birmingham). Shes had several.
My point was only that it would not happen now.

You aren’t being unreasonable - we have had a mortgage for over a decade but are now looking to upsize and our mortgage is doubling. Even going for a much longer term than the remains of our current mortgage, we’re still going to be super stretched so when our fixed term ends in five years…we’re just desperately hoping that we’ll have made it through this bubble of excrement by then. Or that we’ve both been promoted several times. But that the worth of that money won’t have tanked thanks to the spiralling cost of living.

Terrified doesn’t even come close and I’m the laidback as fuck ‘sun will come out tomorrow’ type usually.

Is it worth being terrified for possibly a long period of time? Do you really have to upsize now?

mortgages are at a critical stage - I know it’s no comfort - but in the early 1990’s bank interest rates hit 17% during what became known as black Wednesday - HOW DID WE GET HERE NOW … a combination of disasterous global events … Covid, Russian invasion of Ukraine etc etc etc - in 2009 when the last financial crash happened and banks called in business overdrafts - I stopped one day at a rural based petrol station and a young lady who worked there but was a modern day hippy - I happened to say, oh the news is so depressing are you affected by what’s happening - it’s stuck in my mind all these years later … SHE LAUGHED and in a slow, sarcastic voice, she proclaimed, “E v e r y t h i n g is ok … there’s nothing w r o n g (dragging the words out) they’re just trying to find ways to make more money on bonuses” - a year went by with media obsessed with the words, ‘credit crunch’ - the money men filled their pockets and it all settled down - similar is happening again - once they’ve frightened everyone and realise there’s no new business coming through the door - costs will fall, the pound will go up and the money men will once more suck up the profits with their zest for creative accountancy - “there’s nothing wrong everything’s ok!”

As others have said don't wait until the current rate runs out, start looking now.
You may have penalty for ending before the end, if you have it can be most likely added to you mortgage. Either way may be better to take a hit and also may a little more over coming months assuming you can fix ideally longer than 2 years than wait and get a rate you can't afford.

Cloud cuckoo land.

I disagree, my broker ran through the figures upto 12%.

It's part of being a responsible lender and not setting people up to fail.

We've taken an initial 5year fixed and then another 5year fixed at the end of that, were coming to the end of that second fix period and we'll need a 2-3 year to get us paid off.

How people laughed when we said we'd fixed at 2.04% when 1.3% rates were on the table.

We worked out what it would cost us at 8% and have paid that amount as an overpayment amount since day 1.

Have a look at money supermarkets over payment calculator. Over payments have bought our minimum payment down to £190

The rates for the last ten years have been incredibly low and a return to higher standard rates was inevitable. It's a couple of years late as the BOE have been slow to act.

Everyone should have been overpaying while rates have been so low, it would give a double whammy now rates are rising.

Failure in the OPs case to realise the rates would rise and failure to point it out and check affordability by the broker or lender has lead to this situation.

Had the lender pointed out the cost of the mortgage at 6,8,10% then the op may not have taken the mortgage, had they explored the affordability and found the OP would be in difficulties they may have declined to offer the mortgage.

This is the thin end of the wedge if the OP has other borrowing, Don't forget the rate rises will affect other credit such as loans, credit card rates, store cards and accounts like next accounts, insurance (where paid monthly) car finance including the god awful PCPs and even potentially things like Mobile phones.

Things like phone contracts, Internet and telecoms, even rail fares are subject to rpi rate increase so we will rise more than normal.

The OP needs to think carefully at this point and consider options should the mortgage rises be untenable.

Talk to the lender and their "difficulties paying dept", they're always much happier to help before arrears occur.

You are not being unreasonable - I feel your pain! My husband and I graduated right into the heart of the 2008 financial crisis and we struggled to get jobs at the time, let alone a mortgage. Also our cheap student debt became very expensive overnight. It took us a decade of hard work to get onto the property ladder and even at that, our home is small with only one bedroom as we were worried about overstretching ourselves (once bitten twice shy). We always intended to move this year and have budgeted, saved as best we could, but we now find ourselves in a situation where I don't think we can upsize without some seriously painful compromises, which is hard to swallow after so much financial grief in our 20s. This is a bit of an issue as we recently became parents, so moving is unavoidable. Even on our current mortgage, which is due to end shortly, the rising interest will be a serious blow to our finances - its just painful! I worry for first time buyers, it was hard enough for us.

Following this with interest (no pun intended).

having something of a mental crisis myself here…. 18 months to go on current deal at 2.5%. Chase the option of paying the ERC and moving onto a new 5 year deal which is 4.5% - and it basically adds £100 per month to our repayment figure (£140 actually when I take into account the ERC)z. Not sure what on earth to do tbh. Help, it’s really turning me to despair over what is right.

Is saw Martin Lewis on breakfast telly this morning. He seemed pretty despairing too, which is rather alarming.

We are fixed on something like 1.8% until November 2024 so I am grateful for that but I am genuinely concerned what will happen after that. I know it's a few years off but it's just not nice to think about. I am hoping by then things may have stabilised.

It's just a scary time. We want to move to a bigger house but the house prices and the rates just make it impossible at the moment so we are stuck for now

It's not just mortgage rates, on Oct 1st energy costs vastly go up (64%?).

I really don't know how most people expect to manage. Naturally, as mortgage rates go up then landlords will be raising rents to cover it.

I despair.

Obviously this situation is a huge problem and the Government have created a terrible situation on the back of other global issues.

But there is also an unavoidable truth that interest rates have been artificially too low for too long and the BOE have been lagging in increasing them. The truth is they should have started the gradual movement upwards quite some time ago.
then they may have settled out nearer 3% with mortgage interest rates adjusted accordingly. There is no escaping the fact that the incredibly low and artificial interest rates that many have got used to and based calculations on were not going to last forever. We have had the lowest interest rates in this country not seen for 300 years but it’s also completely understandable that many got used to this and thought these were normal when they weren’t.

My view would be if you can find deals sub 5% fixed then I would take them.

Contact your mortgage lender .. they may possibly allow you to fix sooner without being penalised.

I’m worried. We fixed earlier this year for five years on a relatively low rate, but due to work, it’s likely we’ll need to sell and relocate within the near future - such bad timing.

Absolutely get in touch with your lender.

I'm a long time renter who can't save a deposit, so would welcome a large correction in house prices, but the reality is we can't save due to COL and probably rent increases and might even get kicked out if my landlord sells. It's shit.

The best hope that people in your situation have is that the epc requirements for landlords to achieve level C frighten landlords into selling at sensible prices. While energy prices are scary, to bring older properties up to an EPC C rating, which will be the legal minimum for rentability from 2023/24, is going to make renting poorly rated properties unviable. So the trade off for the next 24 months is to bargain hard-ish if you're buying from a landlord who can't or won't make the grade. The price you will pay is that your energy bills will be high until you can afford to pay for the improvements you need, and you will need woollies until then.

Unlikely IMO, rents are run by wages, good luck raising rents in a recession, and as no one will be able to buy ex-landlord properties at current prices due to increasing mortgage costs many landlords will be either doing fire sale prices to get out or dropping rents to keep tenants in place and avoid the nightmare of an empty money-pit. Fun times ahead!

What is interesting is that Nationwide's 5 year fixed rate is lower than their 2 year fix. The 10 year fix is even lower.

This suggests that they are expecting interest rates to peak at some point in the next year or so, and then fall back down.

Looking at what's happening in the US, I think rates will be falling by early 2024 (although not to the historically low levels that we've seen over the past few years). If I was remortgaging next year would be reluctant to take out a long fix at a high rate.

Why? He isnt really an expert on anything, he is just telling you things that you could look up on the internet or work out with some common sense. The "Money Saving" site that he started is over-run with people telling other weaker minded souls to always pay more for property and that any time is always the best time to buy! Looks like that advice has turned out well doesnt it? LOL.

Just to point out that there was no magical past with council houses for all, and the rules were strict even then.

My mother arrived back in the country with two children under 5, escaping an abusive marriage. She wasn't eligible for any support for an entire year, and never did receive a penny from my father. We moved in with my paternal grandparents, to their small flat. GP's had a tiny bedroom. Living room for the 3 of us: sibling and I top and tails in a single bed, Mum on a sofa. Kitchen had a dining table and a plastic tub for sit baths in front of the coal fire. Outdoor toilet downstairs, shared with the rest of the stairwell.

When we finally qualified for assessment, the council officer saw how we were living and came back with keys later the same day.

Yes, social housing provision is worse than it has ever been - but it was never handed out like candy.

Anyone who was planning on upsizing soon. I would suggest they stay put for a while until this blows over. The only reason we won't be struggling is because a house purchase fell through last year and we haven't seen anything we like. Our 5 year fix is ending in April but thankfully we will be ok because we still have a very small mortgage we were going to take on a much larger one. Posters need to be really careful about budgeting and be more risk adverse. I've been hating my house for a few years but I've never been so grateful for it right now.

I also think BTL landlords will start to bale out big time once the EPC requirements being imposed next year start to bite. And then I think it will be a firesale as they attempt to liquidate their portfolio of cheap rentier property.

I doubt it in many areas there are far more people wanting to rent than places are available

rental prices have increased many landlords will just cover the costs with a rent increase

What do they do then if tenants cannot pay?