Mortgage crisis

[Supermummy88]

Good evening ladies!

I would just like some advice. Me and my husband are in a major panic and literally don’t know what to do and what our options are. We are currently paying £1200 a month for our mortgage and it’s manageable…we have been paying that amount for about 5 years now. Our 2 years fixed is coming to an end and we have now been quoted £2020 a month. I just don’t understand how on Earth the government think anyone can just magically pull out an extra £800 a month! Interest rates are now above 5%! We are paying an extra £120 a month now for our electricity/gas. So that’s an extra £920 a month for us. We can’t do extra jobs as we work full time already and have 2 young children. One is in nursery so we are paying fees aswel. There are no cuts that we can possibly make to be able to pay that amount every month.

Any advice please?

Oh stop it! It's different times. The vast majority of people would never get a mortgage if they stress tested to 15% due to house prices (almost everyone in the South East).
It wouldn't be financially advisable to do so either as rent is more expensive and you'd miss out on equity from house price growth by staying off the market.
The 15% people need to realise it's different now - or as people have said 6% is the new- 15% and stop bringing it up all the time.

Sorry Sestriere - not meant to be particularly aimed at you!

People banging on about how they coped on 15% clearly don’t actually remember it that well, or they’d also remember that interest rates went to 15% for exactly one day.

I’m another one saying to speak to a broker and if you can’t find a manageable deal then speak to your current lender. It is in everyone’s interest to keep you in your home.

wigywhoo · Today 06:48

mellongoose · Today 03:55

Not sure why the Government would have a say in the amount you pay on your mortgage. It's not up to them!

This.

OP, also Rates have been ridiculously low for ages, this has been shit for savers. Rates are rising in the US and the Eurozone - this day has to come. I know the additional cost will of living issues compound things right now, but people need to take responsibility for the amounts they have borrowed. Did you never think "what if rates return to "normal" levels?

This just makes you sound like a dick.
People need to take responsibility for how much they borrow? Sure but they need to live somewhere. What are they supposed to do when house prices are so many times average earnings?
And boohoohoo, things have been shit for savers? Are you kidding me? Do you know how lucky you are to be free of debt and have savings?? Seriously. Some people are completely out of touch with real life. Tory voter?

Really easy to say @FreddyHG "that people should factor in what they borrow if it is actually affordable to them. Interest rates are historically low and will rise further. If this is unaffordable now then you definitely over borrowed"
We bought our first flat in 2019 for 515k. We could not have foreseen Covid happening in 2020 and consequently the company I worked for going into administration and therefore me losing my job. Thankfully we moved abroad and last year we fixed our mortgage for 5 years - thank god. But there will be some people who have already had 2 years of hardship that are now faced with rising interest rates as well as crippling energy bills, higher cost of living - food/petrol. I didn't have a crystal ball in 2019 to foresee all of those rises and even if I had I'm not sure it would have helped, perhaps I would have moved abroad sooner.
Even if you decide now that you can't afford to buy, lots of people can't afford to rent! The rental value of our 1 bed flat increased by £700 per month from 2021 to 2022. Which is ridiculous.

Definitely speak to a whole of market broker and see what they come up with.

You could try to extended the term or ask to put it on part repayment/part interest only. Or just interest interest only for a while.

@Sestriere

Oh please! Another of the 15 percent crowd. Do you understand how much higher house prices are now in comparison to wages? And that two incomes are required?

Rates hitting 6 percent will be fiscally equivalent to the 15 percent of the 80's.

My understanding (happy to be corrected) is the '15% club' also benefitted from tax relief on said interest. Obviously devastating for the thousands of individuals who lost or nearly lost their homes but, as a cohort, they are really not comparable to the current mortgaged generation.

fuck off the recent hike is purely down to KamiKwasi awful budget that panicked the markets, Bank of Englands 65 billion in gilt purchases.

but people vote for these fuckers.

and we still haven’t had the full impact of Brexit as the inbound checks keep
gettong kicked into the long grass

we have the worst performing economy in the G7 and it’s fuckall to do with Ukraine. (That has added a little but most of it is our own doing)

@Faciadipasta I know personal responsibility is alien to the left wanting everything to be handed over on a plate. But people borrowing so much exactly causes house prices to rise. It's the fact people are prepare to stretch themselves so much is a risk they personally take. I chose to rent for as long as I did because I was stress testing myself for mortgage and wouldn't have wanted to see it exceed even 20% of income at 6% rates. It's just basic responsibility. Really the biggest issues are banks over lending to people who are unable to responsibly borrow and including both wages in the affordability.

@Meltingsocks 2 incomes being required is a result of feminism. How many on here would long for the days where the females income wasn't taken into account on a mortgage application like the good old days? Banks over lending and people willing to borrow more than they can afford caused house prices to be so high and when credit becomes less available like it is now they will fall again.

ODFOD, there were no tax credits in those days to top up your income or free child care hours either. Two incomes were needed then too. I never had the luxury of not working full time until I was 55, my entire salary went on child care.

This isn’t a pity competition.

The fact remains those low interest rates were never going to stay like that.

@FreddyHG you’re an idiot, and showing yourself up as such by claiming it’s a problem on the left. I think you’ll find an awful lot of the people affected by this are in both the old and new tory heartlands, from the Home Counties to the red wall.

But You’ve got yours, so screw everyone else, right?

It's all the governments fault. They announce the unfunded tax cuts, the bank of England announce they will have to raise interest rates much more aggressively to calm the economy, banks start adapting products in anticipation.

Also, back when rates were 15%, the average house price was only 4 times the average wage. It's 8 to 10 times now.

People have been forced to take on large mortgages to get a normal house. Whilst we all knew rates might rise at some point, this sudden increase is all down to the Government. The boe were trying to raise rates slowly to avoid panic. Good job Truss.

This simply isn’t true. This is interest rates at the end of each of the quoted years:

Bank rate at year end (%) (source Bank of England)
1979 17
1980 14
1981 14.375
1982 10
1983 9.0625
1984 9.5
1985 11.375
1986 10.875
1987 8.375
1988 12.875
1989 14.875
1990 13.875
1991 10.375
1992 6.875
1993 5.375
1994 6.125
1995 6.375
1996 5.9375
1997 7.25
1998 6.25
1999 5.5
2000 6
2001 4
2002 4
2003 3.75
2004 4.75
2005 4.5
2006 5
2007 5.5
2008 2
2009 0.5
2010 0.5
2011 0.5
2012 0.5
2013 0.5
2014 0.5
2015 0.5
2016 0.25
2017 0.5
2018 0.75
2020 0.25
2020 0.10
2021 0.25
2022 0.5
2022 0.75

Rates are climbing everywhere.

the problem as others have said is people have over borrowed to buy their property with low interest rates, then additionaly borrowed for cars etc and have little or no savings.

Covid brought a false sense of security with Furlough and people having extra cash due to no spending for work travel etc, using the 'extra' cash to fund house move new car etc.

Then our friend Putin decided to annexe Ukraine and fuel costs rocketed causing inflation to increase etc and suddenly we are all looking at a deficit in income verses outgoings time to tighten belts and reduce outgoings! the tory mini budget is not to blame entirely, peoples poor planning is the largest issue!

It is going to be very difficult but didn’t everyone applying for mortgages since 2007 gave to ‘pass’ the much stricter affordability criteria, ie could they afford payments if interest rates rose to 5%, before an offer could be made?

Hopefully rates much higher than 5% will be fairly short-lived but imho 3.5-5% is likely to be as low as it goes for many years, so longer term plans need to be considered.

I’m hoping it will, on balance, be fairer for the twenty somethings hoping to buy in what is currently a ridiculously overinflated housing market due in the main to the Bank of England’s QE / cheap money policies for years and years.

On our last house, we did a ten year fix at around 4.5% (2006) because we thought that was relatively low on a “long term” basis. Turned out to cost us quite a lot. We got a 5 year fix last year at less than 2%. Lucky timing this time.

What is the point of saying “you should allow for 15%”? Yes, if everyone refused to borrow more than 3x income or whatever, house prices might come down… or houses might all be sold to professional landlords and rent prices would be just as much of a problem. There’s no easy fix. People need housing.

Affordability criteria probably didn’t include energy bills doubling, inflation on food being so high etc.

Also it's a bit misleading to suggest that renting for longer to stress test your personal finances is a good idea. Like most people, when I was renting, the price of houses was going up more than my rent, ie. I was getting further and further from being able to afford to buy each month/year of renting.

This is what I would do. But rental property is in very short supply just at the moment. Or house share with family, possibly take in a lodger (difficult with small children, I imagine).

Yoi could also go interest only to give you some breathing space while you have childcare bills, but the thing will have to be paid eventually. (Or not. Maybe interest only will become the norm, and mortgages will become a sort of permanent rental arrangement?)

There’s extending the term, depending on how long you’ve had a mortgage, but it’s still a stop gap.

You could consider a mortgage holiday, but honestly, I don’t think this is going to be short term. The base rate is going to go up to around 8% and perhaps as high as 10%, for some months before settling at 5/6%. Just like it always has. I imagine there are great many people who have never seen that. I’m 44 and bought a house at 24. I earned 15k, the mortgage was around 60k and the house (big 4 bed terrace in a nice city) was around 90k. My payments were about £600 a month. On a 60k mortgage. And all of that was entirely typical.

Rates have been artificially low for a very long time. People under about forty haven’t ever seen these interest rates before (in their house-owning years which is when you pay attention) and can be complexly forgiven for thinking the low rates we’ve had are normal. They’ve also been allowed and encouraged to borrow much higher amounts for more expensive houses and everyone has complained bitterly about affordability and stress testing, because it was so much more expensive than rent. Sadly, those days are gone. If we are very lucky, and have a change of government, we might get low interest rates back after a high peak and then a long slow rise over a number of years to ease us back to normal, but I’m not an economist and don’t know what the implications of that might be. It might not be possible, but for ordinary people, it’s the best possible outcome I can see.

Oh, and don’t vote conservative. The government don’t care where ordinary people find the money. They couldn’t give a monkeys if people lose houses. In fact, they’d love them to. It’s a smash and grab, so the super-rich can acquire even more limited assets, cheaply and rent them back to you a fat profit. Cheers Liz.

Op as others have said your options are to extend the term or to go interest only until you stop paying for childcare. Give your mortgage provider a call and see if they will offer either of those options.

Also worth speaking to a broker and seeing what's the best rate you can get.