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?

So you didn’t pay into a pension? Did you not foresee (with that foresight that makes you oh so much better than us poor millennials) that this might be needed?

I might have had to take on a larger mortgage than you but pension gets done every month without fail.

Typical smug boomer!

So you didn’t pay into a pension? Did you not foresee (with that foresight that makes you oh so much better than us poor millennials) that this might be needed?

Women weren’t invited to join company pension schemes. It wasn’t like now. I don’t think people even knew how to join a private pension scheme unless it was through their company. It was a very different world in the 70’s.

l remember as a graduate in 1988 plucking up the courage to ask to join the company pension scheme. I was told only certain ( male) people were invited, so that was the end of that.

I’m east mids. Mine is worth about £310k. 4 beds, one en suite, family bathroom. 2 receptions and a study. Small garden on a newish estate. Not huge, but nice enough.

I’m in Sheffield. Hideous house prices round me. It has the highest over the asking price offers in the U.K. Because of it’s proximity to the Peak District it was one of the most popular places to buy when working from home became the thing.

@Eeksteek I earned 15k, the mortgage was around 60k and the house (big 4 bed terrace in a nice city) was around 90k.

so the house price is 6 times your salary.
wonder 15K back in 20 years ago is it a very good rate?
nowadays, let's say 50K, a borderline of a higher tax rate, 6 times = 300K,
only can get a 1 bed flat in London zone 3. (or 1 bed flat new build in zone 6)

I posted quickly, sorry - I do know there are places where getting a 4 bed for £300k is doable. But if your job isn’t in one of those places, then it can be more like a small flat for that.

The original point was about people wanting the moon straight away - I was trying to say that you aren’t necessarily getting lots for your money.

Also a lot of FTBs are much older than previous generations so of course they have different housing needs.

Just to weigh in on the whole generational fight thing... in that generation that first bought when interest rates were high - 12% in my case. What I see is many younger people who have grown up in this low interest rate who simply don't believe that it's possible for rates to reach 6%+. So many seem to be prepared to carry on on SVR because they think someone or something will prevent rates going up. I don't want to gloat, I want people to make decisions now with open eyes that could protect them in the future. There were so many reposessions back when rates were high, and some property prices literally halved. If it's true that modern 6, 7, 8% rates are equivalent to those 90s rates then we are dangerously close to a crash way beyond what happened in 2008. Anyone who stands up now and says "I'm worried, what can I do?" is asking the right questions. You might decide that you will take the chance and gamble on rates coming down - but at least take that gamble based on a fair assessment of what your odds are, not on blind hope.

I am a bit worried about mortgage rates as our 5 year fixed ends December 2023 and think god knows what it will be then.

We pay £858 per month 3 bed mid terrace we ideally need a 4th bedroom as have 4 kids but we brought what we could afford.
We put down 54k deposit the majority of that was from inheritance.
So we borrowed £190,k over 24 years because husband older so when we come to remix we can't extend the term beyond 19 years as husband currently 50 and I'm 42.
We think the house is worth £330k Bristol prices are insane high and rents for 3 bed same postcode range from 1k to 2k per month so more than our mortgage.

After 1st child was born I went back to work full time and paid £800 nursery fees so after 2nd quit work as no family locally wasent viable.
We lucky husband earns ok money but as family of 6 we have high outgoings.
Over the years worked few part time jobs wanted to wait until child 3 was at seniors and child 4 started primary to go back to work and do 3.5 days.
This possibly worked in my favour as we took out a mortgage just based on 1 income.
The depressing thing is with everything going up the 2nd income now is helping us get by not being additional money.
We could weather a increase but combined with childcare will mean we no better off.

I'm concerned about 2023 as
Jan husbands technically getting a pay cut due to changes in commission and overtime.
I have to pay some child benefit back as for 1st time ever exceeded limit due to lockdowns non essential reopen in April 2021 inflated sales april2021 to April 2022 never to be repeated again.
So annoyed the 50k taper not beeb upped in 12 years.

April some of energy help will stop.
So £66 deduction off energy is only for 6months.
Most other bills go up in April..
I'm so low paid I pay minimal ni and no income tax as below 12k a year husband may gain a little not sure when ni from I know penny income tax is April 2023 but
Thats drop in ocean when you add up everything else going up like mortgage/ energy and food/ clothes.

We wanted to borrow more and extend our home but given up on that idea now sadly.
That would have helped the local economy can't contemplate more debt with rising interest rates.
We trying pay off overdraft and credit cards before we go to remix in hope that we get offered a competitive rate as low or no consumer debt.

Thinking what we could cut.
We could maybe save a little on TV and subscriptions.
We can't save much more on food really been trying on that as its our main variable.
We buy 90% of our clothes 2nd hand.
We only run 1 car.
We had no holiday this year and probably won't next year.
We trying to lower the xmas budget this year.

Yes I accept interest rates moving upwards globally so has inflation.
But the UK is far worse due to incompetent government and brexit.
The sharp increase in mortgage rates ? Collapse of sterling and near collapse of pensions is the Conservatives/truss fault.
Her plan for growth won't work if everyone is skint.
The UK is mostly tertiary sector so retail goods and services.
I cam see non food retail, car sales, hospitality and tourism sector really struggling.
We import a lot over 50% of food so weak pound is bad.
We buy energy and petrol/ diesel in dollars.

Ad for energy the cap was £1900 last week its now £2500 and that's a average as she led some time believe their energy bill won't be anymore than £2500.
Apparently the average is 2adults abd 2 kids in a 2 bed house.
We pay around £3200 now in 2020 we paid £1200 year.

Whole of market broker here 🙋🏼‍♀️ Speak to an advisor asap. Anyone who has a product coming to an end in 6/7 months or sooner, speak to a broker. It is so hard at the moment for people, I really feel for those struggling…my own mortgage comes to an end feb 2024 and who knows what it’s going to be like then 🤷🏼‍♀️.
extending term or partial interest only might be an option but not all lenders offer it and not everyone is eligible, so worth speaking to a broker before you sign into anything you feel is unaffordable, we can check everything first. Most brokers don’t charge anything until they are applying for something suitable.

hoping this doesn’t last too long as it’s chaos at the moment.

It doesn't matter how people felt about 15% mortgages, or how they individually coped (or didn't). It is just an example that mortgage rates can go up that high and have done so. People in recent years have put their heads in the sand and refused to listen to this because they didn't want to hear it.

the housing market is a bubble. It will burst at some point. It might not be in my lifetime though as governments (of all colours) are desperate that it doesn't burst on their watch.

People in recent years have put their heads in the sand and refused to listen to this because they didn't want to hear it.

I don't think this is necessarily true, certainly not for most. It's not that they didn't want to hear it, or were just ignoring this possibility, it's that we all have to live somewhere. If a small 2 up 2 down house is priced at almost 500k either you buy it at that and mortgage yourself to the hilt or you refuse to pay that and instead have to pay out much more monthly on rent, that's if you even earn enough to be able to rent those properties in the first place.

The bigger problem was from 2008 onwards when rates were really low - that's what's fuelled house price inflation for the last 12 years. Buyers were gobbling up the cheap mortgages fuelling the market. The financial authorities kicked the can down the road, instead of letting the correction happen properly in 2008, and now it's ready to explode and they are running out of ways to prevent it.

A buyer/homeowner can afford £x per month for their mortgage. In the 80's most of that monthly payment went on interest, in the 2010's it was going towards capital repayment on much higher house prices. But now house prices are higher, the mortgage repayments are much more sensitive to interest rate rises.

There's also proportionality to consider - a rate rise from 0.25% to 6% is increase of 24x, a rate rise from 4% to 16% is only 4x.

On top of that, everyone has been conditioned to buy stuff on monthly payment plans. That wasn't the case in the 70's and 80's - hardly anyone had a new car, for many that would be a once in a lifetime thing. You'd save up for years to buy even a decent used car. So people had more flexibility and less allocated outgoings. And not cars on £300-£500 a month lease contracts, mobile phones, gym subs, sky/netflix etc.

If only interest rates had been gradually increased again post 2008, house prices wouldn't have sky rocketed (especially post pandemic), and we wouldn't be in this pickle now.

I considered paying my ERC to take a new 5 yr fix earlier this year. Could have got about 2%. But my broker talked me out of it on the basis that he couldn't see rates going up much, maybe to 3-4% max. Spoke to him again last week, but was similar story - they can't go up much further than the 5-6% on the horizon. He's a relatively young bloke, but it's concerning that even the professionals aren't opening their eyes properly to where this could go.

In the nicest possible way, it’s possible to pass the mortgage broker exams without having a decent understanding of economics.

Which was one of the factors contributing to the 2008 financial crisis (‘the credit crunch’). The people selling the mortgages didn’t have a f*ing clue about swap rates or derivatives. Mind you, the FCA and the other financial regulators were asleep on the job too.

@altmember summarises what happened post credit crunch nicely.

Astonishingly, people are still talking the market up on other threads, or claiming that base rates will peak at 5% then come right down again.

plenty of places in Derby etc go for that.

Always interesting to see the generational argument. Whilst I don't underestimate challenges of previous generations, I think the two are incomparable.

Reality is for a lot of "new" homeowners we had no choice except to stretch borrowing against income. We will also have no choice except to work until mid/late 70s.

Would be interesting to know how many of those who paid high interest rates in the 80s retired on state pension at 60? This will not be an option for the vast majority of the current generation. Likewise free eduction, final salary pensions, being able to get a 2nd job because there was no such thing as an always on culture, not needing technology to get/do a job and therefore having little choice except to buy a phone/computer.

The world has changed. It's sad to see we haven't learnt from the past.

This 100%! People have over leveraged on cheap debt past 10 years and didn't stress test themselves for when interest rates go up, banks did the bare minimum, some people took on the risk, others didn't, mostly those with less than 15% deposit and took out maximum mortgage they were offered will be the ones suffering the most / at risk of repossession.

I paid high interest rates in the 80’s. I’ve got to work until I’m 67.

Final salary pension disappeared 12 years ago under Cameron. I couldn’t do a second job as all my time was occupied in my main job. I got a computer at work years ago and was always ‘on’. Always had to but my own phone.

Who are these people you are talking about? I don’t recognise them.

I brought my first home when I was 21 and I’m now 32 so of corse it was a silly small rate, I had no idea of what happened in the 70s, I never new rates went really really high! I was 21 and blind and went in all guns blazing “I can afford this it’s well cheap”

a lot of people my age we haven’t seen the way it was in the 70s and 80s and the people that did live through those times of buying and losing homes they are the people that we should listen carefully to and take their advice.

my best friend is a mortgage broker she’s 29 she was the first to tell me there is no way the rates would go high again like the 70s/80s, I don’t believe anyone knows it’s the million pound question.

but if all my friends were mortgage brokers in there 20’s and 30’s I would pay more attention to a 60/70 year old stranger on the street who lived through it.

times are really hard for the 90s baby’s and millennials but are people seriously suggesting it’s harder now than then?????

its not harder people just have more debt because you can get debt easy.

people in the 50s/60s/70s will have good advice…. Sorry let me rephrase that WORKING CLASS PEOPLE!

so tell me guys my 1.5% mortgage is ending in December do I lock in my new one of 4.89% at 5 or 10 years??? How long are we screwed 🙃

I would (I am). I think we will see rises up to 8, maybe 10 percent. Then back to 5/6ish. I’ve fixed for five years, but for flexibility reasons. Sucks, cos I’m only 2 at the moment. I want to sell in five years, otherwise I would fix for ten.

Too many people have over borrowed and I don't know how they didn't foresee this.
We bought our house in 2009 (at 23). Mortgage of £183k on a £207k purchase. We have borrowed another £60k since then to extend. Every year we've though"rates will go up this year" so have consistently overpaid to reduce the balance for when it happened. It's been 12 years longer than we anticipated and I'm naturally cautious so we've not changed our approach in that time.

House is now worth £450k and our mortgage is £105k. We're in a 5 year fix now with 4 years to go so no immediate payment increase for us but we've decided to make overpayments equivalent to 6% rates. We're expecting house value to drop over next two years and equity is only really useful if you are downsizing or moving to a cheaper area.

We could have, and very nearly did, mortgage ourselves to the limit and buy a 'forever home' during the stamp duty holiday - lots of our friends did. However, to me a forever home is one I can afford forever not one with three bathrooms!

In fairness you did mortgage to the hilt with a 90% LTV when you bought in 2009, and then borrowed more. Fortunately rates remained cheap for long enough that you've managed to clear this down but if today’s events occurred 10 years ago, you might have struggled too.

We can argue about who should foresee what, but people need somewhere to live and lots simply housed themselves at the price of the market, and are very unlucky to be caught in a relatively sudden rate rise alongside a massive cost of living crisis.

So many smug people on this thread.

But what about all those who overborrowed simply to be able to afford a small 2 bed starter home with 1 bathroom?
Not everyone who faces the prospect of their mortgage payments going up by hundreds a month is sitting there in their 4 bed house with 3 bedrooms.