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

One couple I know, both on good salaries but one working p/t, borrowed the max they could when they bought approx 3 years ago. They are resigned to going on to an interest only mortgage when their deal ends. One of them works in one of the emergency services where it is the norm to retire at 50/after 30 years, and in ten years will have a pension lump sum that will be big enough to clear the capital, so if need be, that's what they'll do. They will be able to return to their job as a "civilian", so will still be earning good money for the remaining 15 years or so of working life.

Someone else I know has rented their house out because they can't afford the mortgage, and is now renting the annexe at their mother's house. Tbh, they never could only afford the mortgage before by having lodgers, but because they have 50/50 care of their young daughter, they don't want to have randoms moving in and all their friends now have their own places. It was the last lodger moving out that made them realise they couldn't afford to stay there.

A colleague is planning to rent out a room, possibly 2, when their fix comes to an end, another will downsize now that that all their kids are settled in their own places, which will reduce their outgoings significantly.

I feel bad for people who don't have these sort of options. It's grim.

We didn't plan the DTs (well, we planned one of them!). Childcare alone will push us way beyond any other outgoings.

Crap. There doesn’t need to be rampant inflation. The BoE can use quantitative easing to get us over this period. As they have done in plenty of other emergencies. This is a choice.

A lot of the people remortgaging now will have applied for their rates a couple of months back, so if you know people who've switched in the last few weeks they could still be on sub 3% deals fairly easily. We haven't seen anything like the full impact yet.

But in general, the picture is very mixed. Some people will easily afford it, some really won't, and if they can't extend the term they'll be fucked.

This is just wrong.
Can you imagine what would have happened without Bank of England independence?
Liz Truss would have been able to continue to perpetuate her insanity unchecked. Only the fact that the Bank could stand up to misinformation, and the Office of Budget Responsibility legally requires that government publish actual facts about whether the sums add up, stopped the madness.

The BOE needs to start serving the British people and not be in hock to ‘markets’.

and how does that work? 🤔

Why can't the lenders extend the term though? They'll get their money back eventually and make more in interest charges.

It's better for the economy to not be on emergency interest rates, look what that has done to house prices. The trouble we have is years of low interest but no investment in skills & picking services & wage stagnation. All growth was house prices which benefits very few although many dont realise this & feel "richer". Now it's a mess.

I think this country is screwed for years to come.

yes because we also have the looming population demographic shift, no idea how that will be funded.

Totally agree - uncontrolled inflation is worse than higher interest rates

it impacts everything we import (and we import a lot) and the price of everything

we don’t want to get into a situation of hyperinflation - imagine a situation where your loo paper is worth more than your cash like in Zimbabwe

unlikely scenario but that’s why it’s critical to keep inflation in check and it’s important for the BoE to be independent in that sense

what happened was the government messed up and threw in changed to increase spending which was at loggerheads with the BoE’s mandate

as for interest rises, it is difficult though- the truth is that we couldn’t have had free money for much longer so there was always going to be a rise though. The pandemic and war have increased inflation and the cost of living and stress tests may not have necessarily factored that in

it will be a difficult few years - but would be far far worse with uncontrolled inflation - impacting everyone and not only those with mortgages

"Crap. There doesn’t need to be rampant inflation. The BoE can use quantitative easing to get us over this period. As they have done in plenty of other emergencies. This is a choice."

Quantitative easing acts like an interest rate cut to stimulate spending and the economy. I don't see how it would help to curb inflation now.

I guess the only options are either sell up and move to a cheaper home or make more money or cut back on other expenses.

There are rules about how much a bank can lend out in relation to the capital it holds, and as I understand it mortgages are calculated with this in mind. So if they expect to get X amount paid back in 2035 they can't automatically say fine, it can be extended to 2040. There are rules and a process that has to be gone through when extending a mortgage, so the bank can ensure they comply with the capital requirements.

The BoE can use quantitative easing to get us over this period.

🤦🏻‍♀️

Quantitative easing is exactly what caused our economy to be in trouble

it does exactly the opposite of controlling inflation - printing free money is never a sustainable solution

Totally agree - uncontrolled inflation is worse than higher interest rates

yep

good to see how many have bought into the nonsense this government tells you. Don’t forget the BoE chief was appointed by this right wing government. Suggest you educate selves by reading a bit more widely.

Nope. Economies do this all the time. It’s not the same as a household- conservative governments keep churning out this nonsense.

My deal ends next December. We will be screwed.

i studied economics thanks - so I am explaining rudimentary economic theory - not buying into right wing propaganda thanks

even the fact you think the BoE is being manipulated in that way says it all

My deal ends next June and I opted to overpay my mortgage by 10% (15k) as opposed to paying my ERC of £3000 to remortgage. I plan to overpay another 13k as soon as I have remortgage taking it down to 124k. Can anyone tell me if I was right to do this or not? 😬

You are the one who has literally spouted nonsense

it is a new monetary policy that has been actioned since 2007 after our financial crisis - and quantitative easing literally works to counter low inflation - in a situation that an interest rate cannot go below 0%

yes governments have been doing it on and off for the past 15 years but that’s literally one of the reasons for why the world finds itself where we are

please do some reading of your own…

Ours would be going up £600+ a month so we will be cutting back on other things to make up some of that but also extending the term to reduce the monthly payment. Means paying more over the longer term of course but hopefully we’ll be able to overpay at a later date when our incomes are higher and get it back down again.

The affordability test idea was good. However, it was based on the assumption that other household bills would not significantly increase.

And then inflation took off. And household energy bills became a significant part of a budget.

I worry for people whose budgets are stretched and who can see this time bomb coming their way

Of course you did. BoE are right wing.