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?

Yes, please do. Back in the 90’s I managed to work with my BS and keep my home. I had friends who not only lost their home but the BS auctioned it off leaving them in negative equity with a large debt back to the BS.

Interest rates were at 15% but a huge market in cheap repossesions for those with money to buy them up.

I don’t think, I know they were my family member was moved straight into one within a matter of days. I actually arrived back from Australia myself in 2001 stayed with my mother for six weeks and was given a beautiful council Maisonette, sadly I moved in with my ex-husband gave it up.

The family member that started out as a 18-year-old single mum and the beautiful council house has had several failed relationships where she’s found herself knocking at the council doors again I believe the last council property she moved into was around 2015.

However I don’t believe for one moment that anybody who found themselves in dire straits now would have anywhere near that level of luck.

The average rate over the last 50 years has been 7% so you should over pay or save whenever it is below this rate to offset when it goes above this.
I would certainly make sure my affordability went to 10%.
Too many people have been exposed to an era of abnormally low rates that they have forgotten how normal a 6-8% interest rate is.

Our mortgage rate around 2001 to 2008 ranged from 4.75% to just over 7%. It actually surprised me when I was looking through old paperwork. The last few years have been unbelievably low

@Diyextension that's not true at all, people absolutely definitely still do that. We did that. The figures involved are different these days, but same concept.

We could have borrowed 350,000 (4.5 x combined salary), but there were no family homes available at that price point in our area. So we bought a 3-bed doer-upper for £299,950 and spent 7 years doing every inch of it ourselves bit by bit. We sold it for £425,000 last year, so we basically made no money at all on it with mortgage interest, cost of materials and our own labour. At least we weren't paying rent all that time though.

We didn't have any foreign holidays or nice cars or avocado toast or any of the many things we're accused of wasting money on for 7 years. I don't know anyone who has done it any other way frankly.

Diyextension wins least helpful post of all time. Classic boomer I imagine.

Didn’t your broker take you through illustrations of what you would have to pay if rates went up by different %ages and could you afford the repayments? Interest rates of 5% aren’t batshit? Surely you looked at this?

All I know is that I was in a low-paying job and we were in dire straits - only survived by racking up credit card debt. It was nearly 8 years before we got our finances in a reasonable state. So maybe it was manageable for some back then - but I know it wasn't for me.

How insensitive! By all means make the point that life insurance is a good idea. But don't do it when replying to the PP who's lost their husband, and is in the process of losing their home. Some people are just the worst.

Can we just stop all the discussion about how it was worse in x day, we aren't living in x day and it's just unhelpful. What do you have to gain by kicking people?

@Chevyimpala67

I agree with you disagreeing with me - to an extent!

People really did suffer, mentally and emotionally. I'd say the vast majority did, myself included despite extreme financial prudence on my part.

And, yes, I've witnessed/heard about the same heartbreaking scenarios as you described. However, imo, although the stress, worry, fear were endemic, the actual 'casualties' (for want of a better word) were far and away the minority.

The vast majority, somehow, managed to 'survive' - perhaps not heroically, perhaps not without having to borrow from family etc., but they did survive with the roof over their head intact.

Negative equity is a whole other matter but that 'only' becomes an issue if you 'have' to sell. I'm sure our place went into negative equity at one point but I did not lose sleep over that as I did when worrying about making the actual mortgage payments to allow us to keep our home. Nor did negative equity impact on my fear sensors in the same way the prospect of redundancy did.

I just hope it didn't come across that I was flippant/uncaring about the casualties at that time, nor about the (undoubted) casualties about to come.

The overall point I wanted to make was the stress, worry, emotional turmoil are identical irrespective of the sums/situations involved.

Also, I hope people are much more open these days about financial difficulties and know when and where to seek help/support.

Yes because properties and the cost of living are both sky high. In the 80s homes were what 2-3 x one persons income, not 5x 2 incomes

Its not a boast, its just you don’t see people doing it that way now.

yeah because even the cheap doer uppers aren't actually "cheap".

Most people now just seem to borrow as much as they can to buy the biggest house they can get.

All the data suggests young people & young families are living in smaller homes vs previous generations so not sure about that.

Don’t underestimate the power of overpaying for the next two years if you can OP. Anything you can do to reduce the sun you’ll need to borrow in two years will help.

Good luck with it.

@OnlyFoolsnMothers that's not necessarily true! Not all redemption penalties are reducing over time.

100% correct!

remember all the threads that argued if you could afford rent then you can afford a mortgage? This situation is why lenders applied stress tests against mortgage lends and insisted on testing other criteria!

Remember also that mortgage advisers can’t just willy nilly advise everyone to pay their ErC to lock into another deal earlier because they are providing regulated advice and can’t risk people coming back in a couple of years if interest rates haven’t risen much more and ask why they advised them to pay thousands of Pounds of fees on top of their mortgages… sometimes adding it to their mortgage and paying more interest on it. For this type of scenario your broker or adviser will have to do a really careful advice recommendation which takes time… and guess what they don’t have much of at the moment? Yes time!! because the industry like every other is stretched and everyone who is coming out of deals imminently will take priority for appointments over those whose fixed rate doesn’t expire til next year or those already on variable rates.

if you contact your lender only will many not have a product right now but you may find they won’t be able to offer you a meeting most likely for weeks or months

I most lenders have not pulled their rates today, some have!

I witnessed the horror of the 90s collapse and I really hope that never happens again.

I bought just prior to the 2008 crash and even prior to that I was paying 4%. You will hopefully be able to manage and try overpaying even a tiny bit more to put you in a better position.

It is hell at the moment. Everything happening at once.

This. ^ People are seriously worried about paying their mortgages and the consequences of not being able to, and all these 'it was worse in our days' oneupmanship posts aren't going to help them.

Ours runs out in May! Our provider allows you to secure a rate 4mths in advance.
we crunched the numbers and paid the £1k early repayment to fix for another 5 years today. It’s costing us another £120 a month but the projected figures for anything more than a1.5% rate rise were shocking! A rise to 8% would have meant an extra £500 a month, £6k a year, £30k over the 5 yr fix!
We’ll Worth paying the early repayment for us.

@HintofVintagePink you are 100% wrong with your assumption about brokers stress testing...... but you carry on!

@peachgreen - I am so very sorry, what a truly horrid situation. To have lost your husband and now have to part with your home too. Sending strength 💐💐💐

Lots of free legal remortgages and free valuation available, get advice.

Terrified and also incredibly pissed off. People around my age have been essentially forced to buy houses at over-inflated prices (or stay in insecure, substandard, even more expensive rental accommodation). It's nothing to do with overstretching or taking low interest rates for granted - it's because there's no other option if you want to own a home. If someone offered me a house with a mortgage for 3x my salary with a higher interest rate I'd bite their hand off, but as it stands it's a mortgage for 4.5x our joint salary because we couldn't buy anything for less.

The housing market has been allowed to get out of hand, people have bought expensive houses because they want a home and there's no other way, now interest rates are being hiked up and it's the fault of people who just wanted a two bed terraced house for them and their children?