How can people afford to remortgage

[Tead]

I have a £200k mortgage. When aI remortgage I will end up paying around £500 a month more. I can just about manage I think although there will be nothing left at the end of the month and we might need to go into our savings.
how would people who are just about coping deal with an increase in monthly payments

Surely how much you pay depends on the mortgage terms and "product" you choose? If you are on a very low interest rate at the moment, and this is due to expire, I don't think you'll find anything very low for along time.

Quite simply, they (we?) wont. Unless something changes, i fear this is the very beginning of what will be an awful few years for some people

We already paid £500 in overpayment monthly so it's no different to our monthly payments, we just are paying interest rather than overpayment.

Have you had your application accepted? If it will stretch you that much you need to be prepared that you might not be approved for a remortgage after they do the affordability checks.

theres options you can look at like extending the mortgage or going interest only for a bit.

in reality though lots will manage, many on low fixes or have more disposable income.

Many will simply not manage. We are anticipating large increases in mortgages arrears, large increases in people seeking forbearance measures. We are moving staff from new business teams to arrears teams in preparation.

If my deal was up now, I would seek a new fixed deal but would hang around on a variable rate for a while, saving up as much as I can.

*would not seek a new fixed deal 🤦🏻‍♀️

We're in the same position. We locked in a decent interest rate a few months ago but because that lender won't do a longer term we'll be paying an extra 500pm. The mortgage will end sooner but will cost us more every month. Because of the recent shit show we can't shop around, there are no better options. Our utilities want an extra 400pm too...

Thinking about us, we would prioritise our house over pretty much anything except basic food and basic utilities. I imagine most people are the same. So it'll have a big impact on the economy as people won't be able to spend money as itll all go on their house, even if they rent it'll be the same story as renters basically pay their landlord's mortgage in many cases.

Any companies who rely on disposable income will be hit hard, which has a knock on effect of unemployment, prices being forced down, recession basically.

Those who cut back as much as possible and still can't afford their rent or mortgage will loose their homes. I guess in that case they will move to smaller/cheaper accommodation if possible, but logically that can't happen for everyone. So I imagine there will be a bug demand for social housing.

Its basically very bad news for the whole country. In the back of my head I keep thinking there's no way this will be allowed to happen. It's a Conservative government who value economic growth over all else. But in reality, they keep proving me wrong so I think we have a very tough few years ahead.

We won't. We'll be screwed.

I can't help wondering if the people shocked by all this are the same people who were furious a few years ago that the banks affordability stress tests worked out that they couldn't borrow what they wanted when interest rates were less than 1%, as if the low interest rates were a permanent thing.

The affordability tests were there to make sure that remortgaging once interest rates were back to normal would not actually bankrupt you. Cutting back on all luxury spending is assumed as obvious. You being just about able to manage so long as you are really frugal is the kevel that the banks were aiming for as that maximises their profits without too much risk, so they got it just right.

But affordability stress tests were only in place from 2014 until August 2022 - just before interest rates skyrocketed.

The people in real trouble are those who bought in August 2022 whose deals will come to an end in 2024 and who wouldn't have passed an affordability test. I have a Facebook friend who has always been on a low income and was never able to pass the affordability tests to buy a flat despite paying rent that was at the time higher than the mortgage repayments on an equivalent property. When the tests were scrapped she was overjoyed and immediately signed up for a mortgage and is really delighted to be moving in to ger new home. She has a deal she can just about afford for the next 2 years but I don't think she will be ok after that. But it's none of my business. I was told off roundly for theorising the possibility of this exact scenario a couple of years ago when she was posting yet another Facebook rant about how unfair it was that she couldn't buy.

lots of them won’t. Sad to notice several new starter homes already up for sale on a nearby, recent development. My first thought was I hope they’re not being forced out because of the Government’s disgusting ideology experiment.

We will need to pay an extra £700, plus a few hundred more in fuel than when we bought, more in food, childcare, fuel, rising costs mean well over £1000 more. We were absolutely comfortable before but finding upwards of £1200 extra is massive. Stress tests did not test for the extremes this current situations has provided.

One of this issues is that the affordability tests were based on an increase in the interest on your mortgage deal, not an increase in your mortgage payments, your food, you utilities, basically everything..... some can afford, say £300 more a month on their mortgage, but they can't afford £300 extra on their mortgage plus £300 extra on everything else so £600 extra going out per month.

The Bank of England are bloody idiots and should lose independence and be brought back under government control. It’s bonkers to raise interest rates. This inflation us due to supply issues, not because we’re all out spending with lots of money sloshing in our pockets. All they’re doing is triggering a miserable recession followed by years / another decade of no growth. This model is broken.

@Italiandreams said it better than me.

The stress tests didn't take into account rises of the size being predicted, more like 3.5% or 4%, and they also didn't take into consideration the fact that cost of living would sky rocket at the same time - petrol, food and utilities more than doubling. They didn't predict a pandemic, war in Russia or useless government. This isn't the fault of borrowers not having a crystal ball.

Don’t be so bloody smug. Was it better for her to be trapped in a cycle of renting - with rents increasing rapidly and putting all her money into paying someone else’s mortgage? No one predicted this enormous cost of living crisis. The BOE needs to start serving the British people and not be in hock to ‘markets’.

It does look as if rates are coming down a bit but they have been historically low for 20 years and I doubt they will return there. We can but hope that over the next 2-3 years salaries catch up a bit or many people will need to move to find better paid jobs, cut back on everything, go interest only, get in debt or sell up. Hopefully the Ukraine war ends soon and Russian gas enters the market again, possibly as part of reparations payments to Ukraine, but I doubt they will ever fall all the way back. It’s going to be hard for most of us but really awful for some.

Our deal ends in November next year,we are dreading it,yes we were stress tested but that was before everything went up ,dh is already working 7 days a week now!

I think this country is screwed for years to come.

I think this is spot on. It’s the increase in the cost of absolutely everything that makes the rate increase particularly hard to manage. I think there was always an expectation they wouldn’t stay this low, but not coupled with a wider cost of living crisis.

Your broker or mortgage lender should have assessed your affordability based on a stressed interest rate. So this exact scenario. It should be affordable for most at the current rate increases unless something has gone seriously wrong or your financial circumstances have changed since you took it. What lenders cant do is stop people after they have a mortgage approved then taking extra credit. A car loan finance tv packages ect most lenders have low debt to income ratios but when food and basic essentials like gas and electricity increase you can forecast that in.

None of this is the fault of the BoE. They are mandated to keep inflation at 2% and the main tool to do that is interest rates. This thread is full of people saying that they will have to cut back on discretionary spending and tighten their belts. Well then as demand decreases, prices and inflation will gradually fall. People are right to be angry and frightened but unchecked inflation is worse.

@tootiredtospeak we have no debt except for our mortgage

We”re remortgaging in July and I’m very very worried. I even debated paying the ERCs earlier in the year but dithered too long and missed the boat. It’s all looking very scary right now.