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AIBU?

To be terrified about mortgage

633 replies

melodypondisasuperhero · 27/09/2022 14:47

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?

OP posts:
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Am I being unreasonable?

1325 votes. Final results.

POLL
You are being unreasonable
13%
You are NOT being unreasonable
87%
SerendipityJane · 27/09/2022 16:05

The last thing the mortgage companies want are thousands of reclaimed houses that they can only sell at a loss

Er, aren't people supposed to be taking out insurance to cover the shortfall in the event the house doesn't cover the capital ? That was certainly a thing a few years back. Although from memory it wasn't insurance for the mortgage holder (i.e. you and me). It was insurance for the lender. And they then got their money back from the (ex) homeowner.

If you have a £200,000 mortgage, and the bank can only sell your home for (say £180,000, you are still on the hook for the £20,000 shortfall. Debts don't disappear unless you are very rich, crooked, or declare bankruptcy.

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fromdownwest · 27/09/2022 16:07

SerendipityJane · 27/09/2022 16:05

The last thing the mortgage companies want are thousands of reclaimed houses that they can only sell at a loss

Er, aren't people supposed to be taking out insurance to cover the shortfall in the event the house doesn't cover the capital ? That was certainly a thing a few years back. Although from memory it wasn't insurance for the mortgage holder (i.e. you and me). It was insurance for the lender. And they then got their money back from the (ex) homeowner.

If you have a £200,000 mortgage, and the bank can only sell your home for (say £180,000, you are still on the hook for the £20,000 shortfall. Debts don't disappear unless you are very rich, crooked, or declare bankruptcy.

Higher Lending Fees are very rate these days

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DawkinsOldSpot · 27/09/2022 16:08

Sounds like you’ve contacted a broker anyway and they’ll probably advise this anyway (or provide figures for it) but it may be worth seeing what the Early Repayment Charge is - if you have less than a year left in the fixed term I imagine it’ll be around 1% of the total mortgage so you could pay this and remortgage now.

Even if rates aren’t crazy next year it may be worth doing this just for peace of mind and not having to stress! Typically you can hold a mortgage offer for 3-6 months as well so you can always get an offer and not act on it for a bit and see what rates do.

Speaking to a broker now is definitely the right thing to do as they can advise you :)

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FTMFML · 27/09/2022 16:09

I think many people are in very similar positions.
All I can offer is a hand hold op.
Take cars X

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FiveMins · 27/09/2022 16:11

I second the London and country mortgage broker recommendation. Total sorted us out last week.
Please may no one ever say again that the Tories are the party that looks after the economy. They are breaking us and the pain is only just beginning. What have they done?!

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RoseBucket · 27/09/2022 16:12

Mine ends at the end of this year, currently 1.99% cheapest today for me is 5.15 % at less than 70% LTV. It’ll put my payments up £175.

I have to stay with current lender due to change of circumstances, I’m fixing with a slightly higher rate but no early penalty charges if I switch again later.

Im going to struggle but have enough savings for 8 months to top up the gap but it’ll have nothing left if my circumstances don’t improve.

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AuntSalli · 27/09/2022 16:14

SerendipityJane · 27/09/2022 16:05

The last thing the mortgage companies want are thousands of reclaimed houses that they can only sell at a loss

Er, aren't people supposed to be taking out insurance to cover the shortfall in the event the house doesn't cover the capital ? That was certainly a thing a few years back. Although from memory it wasn't insurance for the mortgage holder (i.e. you and me). It was insurance for the lender. And they then got their money back from the (ex) homeowner.

If you have a £200,000 mortgage, and the bank can only sell your home for (say £180,000, you are still on the hook for the £20,000 shortfall. Debts don't disappear unless you are very rich, crooked, or declare bankruptcy.

Do you mean indemnity insurance ? I’m pretty sure that was part of our mortgage back in the day I don’t remember seeing it this time around

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NameChangeLifeChange · 27/09/2022 16:14

Im Sorry OP it’s crap isn’t it. I know lots of people say it’s inevitable, we should have been prepared etc etc but almost everyone I know is mortgaged up to the eyeballs (early thirties) and shitting themselves. This is, by the way, due to high house prices rather than lavish lifestyles we certainly aren’t all in 4 bed detached houses wirh large gardens!
We remortgaged 3 months ago- had to pay a £1500 ERPC but we were worried about increased so did it. We had to stay with the same lender as we didn’t pass affordability (I’d reduced hours and second child so huge childcare costs) since the last time so we had to avoid being reassessed! We are desperately hoping things have calmed in 5 years and with both kids in school and better salaries we will have more options.
Scary times though and don’t be made to feel stupid or excessive for having a large mortgage. It’s the sad reality for most young people.

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Nottodaty · 27/09/2022 16:15

Our fixed rate was due to run out in November, I was able to change it in August. A five year deal increased by £175 a month when we tan the numbers then. But that increase in payment doesn’t start till November. My husband and I couldn’t decide whether to go fixed for that long but as we have one in Uni and one in year 8 it just means I can budget as best over the next few years.

Worth reviewing the numbers to see?

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AuntSalli · 27/09/2022 16:16

Interestingly though I tried to get mortgage protection insurance and income protection insurance recently and was given such a list of scenarios that would be considered outside of the insurable events that it literally wasn’t worth doing and it was expensive think £200 a month. I figured I was better off just saving that money which is what I’ve done. I currently have three months of mortgage payments saved in a cash account I’m looking to double that. Unfortunately of course though this becomes a self-fulfilling prophecy because that’s my hairdressing money that’s my lunch out money that wont be spent in local businesses

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SerendipityJane · 27/09/2022 16:17

Do you mean indemnity insurance ? I’m pretty sure that was part of our mortgage back in the day I don’t remember seeing it this time around

Yes, that was it. I remember the chill in the room when I asked who it was meant to indemnify, and the answer was "not you matey"

www.mortgagesolutions.co.uk/news/2001/12/04/how-mortgage-indemnity-premium-client-liable-lender-makes-claim/

Turns out you end up repaying the insurer anyway.

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Itstime1 · 27/09/2022 16:19

I feel for you OP. We refixed ours this year for 10years at 2.6% but have decided to move to another new build that isn’t finished till next year. Our broker rang today to finalise our other mortgage offer today before the bank pulls it. They had like an hour or something to complete it all! Thankfully because it was already in the system they are honouring the rate at 4.8% (we’re actually hoping to port the current mortgage but if we fail to sell our house and have to rent it out then we have at least locked in an affordable rate for the new house).

it’s looking grim at the moment!

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caringcarer · 27/09/2022 16:22

@melodypondisasuperhero, no rate to leave a mortgage fix decreases each year. If you fixed for 5 years and wanted to leave in first year it would be very expensive but if you are in your final year of fix less expensive. However a good broker will check it all out for you seeing if it would be cost effective or not. My gut feeling is to fix for 5-10 years now. I think next Spring/Summer mortgages will be astronomical. I say this as an person who once had to pay 12.6 percent. The thing is mortgages have been so low for so long many people have never known high mortgage rates and the misery it causes. So many defaults.

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Sadgirlonatrain · 27/09/2022 16:22

I was hoping to buy my husband out and had all the paperwork in place but have kept putting it off. Looks like it might be too difficult now, but really can't get my head around any of it.

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Viviennemary · 27/09/2022 16:23

Its really worrying. I thought prices went a bit mad in the last year or so.,Overheated. I heard that Liz Truss is ok with high interest rates if it steadies house prices. What a nightmare she is proving to be.

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Solmum1964 · 27/09/2022 16:24

peachgreen · 27/09/2022 15:20

Yup. My fixed rate came to an end and I couldn't get another mortgage because my husband had passed away so I was now a solo borrower. Had no choice but to go onto the variable rate which doubled the payment and it's increased further every month. I'm having to sell the house, go into rented and attempt to downsize.

I'm really sorry about your husband but didn't you have life insurance to cover you in this situation? I thought it was something lenders insisted on.

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TheOrigRights · 27/09/2022 16:24

Butterflyfluff · 27/09/2022 14:58

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

This was certainly the case when I took out our first mortgage in mid 90s.
The 80s recession hadn't been that long before and people were advised to consider whether they could still afford their mortgage if interest rates went through the roof again.

Obviously the responsibility for taking on only what you can afford lies with the individual, but I do think lenders act irresponsibly when advising people.

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blackpearwhitelilies · 27/09/2022 16:25

Icanstillrecallourlastsummer · 27/09/2022 15:09

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).

You can often come out of your fixed deal, but have to pay. The closer you are to the end of the deal, the less there is to pay. I came out of a deal two years early last November and had to pay £2200, but I fixed the mortgage at a decent rate for 5 years till 2027, so now I'm really glad I did that.

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Notlosinganyweight · 27/09/2022 16:26

Sorry to hear this OP.

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 problem started long ago and was not dealt with. I'm so angry as I dont want to benefit from other people losing their homes, I want the system to be fair in the first place so this doesn't happen.

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MoltenLasagne · 27/09/2022 16:27

It may be worth paying an early repayment charge to get a lower fix now however its possible the rates might stabilise a bit in a few weeks so don't rush that. We paid £2k to do so a few months back which felt awful at the time but we're glad we did now.

Depending on your lender some banks will allow you to remortgage earlier if you stay with them.

Do not worry about repossession. As PPs have said, it's not in banks interest to repossess lots of houses. They will want to work with you to extend mortgage length or, in some circumstances, switch to interest only for a few years - not something I'd really recommend unless it was a temporary cashflow issue e.g. your last child had a year left of nursery and then you had £££ more a month.

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Cherryana · 27/09/2022 16:28

I was having your visions as well so I understand. My fixed was due to end in Feb 2023 with the earliest to renew November 2022.

Except when we contacted both the broker and our mortgage company we found there were ways around it.

We did a product swap with current mortgage holder, no early replayment charge - just an £1000 admin fee. Broker couldn’t get us a better deal than our mortgage company and they were super helpful.

Call them and get the ball rolling to find out your real options not just what you think.

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Remmy123 · 27/09/2022 16:28

We have a couple of years left and thinking over overpaying to soften the blow 😬

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lannistunut · 27/09/2022 16:29

fromdownwest · 27/09/2022 15:19

BOE is using a sledgehammer to crack a wallnut.

Housing has not caused this inflation, it is driven by utilities, food and services.

So crippling households, to reduce inflation is insanity. People will have less to spend yes, but they will still have to pay their eye watering prices for gas and electricity.

The government have forced this situation, the markets are going to get worse if nothing is done.

Blame bloody Truss and Kwarteng.

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MoltenLasagne · 27/09/2022 16:29

caringcarer · 27/09/2022 16:22

@melodypondisasuperhero, no rate to leave a mortgage fix decreases each year. If you fixed for 5 years and wanted to leave in first year it would be very expensive but if you are in your final year of fix less expensive. However a good broker will check it all out for you seeing if it would be cost effective or not. My gut feeling is to fix for 5-10 years now. I think next Spring/Summer mortgages will be astronomical. I say this as an person who once had to pay 12.6 percent. The thing is mortgages have been so low for so long many people have never known high mortgage rates and the misery it causes. So many defaults.

Unfortunately that's not always true. Santander are notorious at charging a flat fee even to the last day and they don't budge even going to Ombudsman.

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Blaggertyjibbet · 27/09/2022 16:30

I think that in any case, overpaying now as though you are already on that 8% rate wouldn’t be a bad idea. It will help you to slowly get used to the reduced cash flow before there are consequences for
non-payment, it will increase your equity in the event rates go so high that you need to sell, and it will also reduce the total interest you owe once the interest rates get to that high level. Win-win.

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