To contemplate a £250 000 mortgage

[spoonbill]

My DH and I have a joint income of £75000.
I remember the 80's when interest rate shot up and lots of people lost their homes so have never wanted to have a big mortgage. But we find ourselves needing to move out of our 2 bed flat and to stay in the area and in good school catchment we would have to increase our mortgage to at least £200 000> I think this is madness.But most people I ask have £200 000 mortgages and think I'm strangely risk averse. I'm astonished. Rates have got to go up haven't they? Am I mad or is everyone else mad? And how are people surviving with such big motgages ?

Well, if you live in the South East a large mortgage is a fact of life if you want a reasonable sized house. Ours is around £290k with a joint income of £80k. Our main problem was actually borrowing enough - we just about maxed out the income multiplier when we up-sized last year from our titchy cottage - but the payments are fairly manageable, and will be for at least another 2 years. I don't believe we are headed for 15% interest rates for a long time.

our mortgage is absolutely whopping - we borrowed more than we could really afford BUT rates are low and acouple of years on it does not feel so bad...

i want my kids to live here it's lovely and this is our priority...

big mortgages don't scare me so long as - if it all went tits up you could sell it for more

Quite a few people have mentioned the 15% interest rate of the 90s recession. It's worth remembering that interest rates were only that high for a single day -- until we left the ERM. They stayed consistently around 12 to 14% for a couple of years around 1988, 89, 90. Then before that they were also that high in 1980.

Full history here:
www.bankofengland.co.uk/mfsd/iadb/Repo.asp

It sounds as though the government are committed ot low rates for at least two years. Personally I would not fix for 2 years, either 5 or a tracker.

I don't think that sounds like an unreasonable mortgage at all and pretty standard round here.

£200000 sounds like a fairly small mortgage to me! and with your salaries not at all unreasonable. Our outstanding balance is still over half a million, which makes me cringe, I look forward to the day when it starts with a 4.

Like others have said though, if you have a nice house and some equity in it, things can't get too bad I don't think. Worst case we could sell up and buy a small flat. Best case, i.e. right now, we are overpaying and have a nice house to live in.

Personally I don't think the interests rates will go up for while. If they've just increased VAT which already hits peoples spending/consumption then it would be terrible for the economy to then put up interest rates in the short-term. Nobody would buy anything and we'd end up like Japan in the 90s.

I think, if you are risk averse (I'm not, my dh is) then you should take on a mortgage that

a) you can pay on 1 salary if at all possible - even if you're both working it's good to have the option

b) you can pay even if interest rates double
OR you fix so it doesn't matter as much

c) leaves you the ability to live as well because it's all very well living in a lovely house but it's no good if you can't afford to eat

I hate our big mortgage. I think the only reason it upsets me is becasue i know lots of people our age who have significantky smaller mortgages. including my sil who keeps moving and now has one about 80k less than us. but this is just my own personal bug bear.

our mortgage is big, 280k. I hate it, we're slaves to it but we only moved last year and it's just how much normal houses cost the area we want to live in. And in M/Cr area really does matter!

We have the biggset mortgage out of anyone we know as everyone else bought their homes round here years ago. It pisses me off a bit when they whinge about being skint tbh, the mortgage and keeping on top of it does make me v anxious.

suse100 the government may aspire to keep interest rates low, but it is the Bank of England MPC that sets the interest rate. What's more, mortgage interest rates are not directly linked to the Bank of England interest rate - they are priced off the cost of how much it costs banks to borrow from other banks. Don't count on rates not going up ...

If you want to scare get a reality check - there are sites where you can download a spreadsheet and put in the costs and it shows you the monthly payments and total repayments. Its a great way to show you by overpaying how much money overall gets saved.

We bought first house in mid 80s and moved a few times and extended mortgage etc - recently though with lower rates have been overpaying quite a bit and changing the term - we are now back on plan to repay within the 25 term of the 1st mortgage we took out - so hopefully another 12-18 months of overpayments and we'll be home and dry as long as the endowment stays on track from the last review.

We are on fixed rate now and possibly overpaying a bit but as we are so near the end of the term most payments go to capital now so the interest effect is not so great - the penalties for changing just don't make it worthwhile.

Based on where we are now 15% interest rates would be very nice to grow savings - our first fixed rate mortgage was 12% .

Yes Oblomov I know the feeling. Our mortgage isn't that huge - £157 but we bought 3.5 yrs ago when things were just about to slow and probably could have got it for a few grand less! People round our way got their homes for about 50% of what we paid at the right time and have a lot more cash. We've got big childcare bills so it is all a bit scary sometimes. I console myself by saying that if we had more cash we might just spend it on silly things anyway! But oh to be silly once in a while!

privet same here and I feel like starting with a 4 will seem soooo small!