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?

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

I doubt anybody is sitting in a 4 bed house with 3 bedrooms.

In fairness you did mortgage to the hilt with a 90% LTV when you bought in 2009, and then borrowed more

Exactly, nothing like a bit of hypocrisy though!

Hello, sorry to ask do you mean you can stay on the same rate for an extended 6 months? I never knew this

@snowbellsxox I think it means you can book your next deal up to 6 months before your current one ends. So if you feel that the rates now are better than what you'll get in 6 months time, then go for it now.

My provider was 3 months, so I did mine 3 months before the deal ended (and got a better rate than I was on as it was before all this started happening).

Good to see people on here who understand what really went on.

To me interest rates weren't the solution though. They target the whole economy, so you can't really justify setting them for the housing market alone.

What should have been done is more fiscal intervention :

i) Higher LTVs
ii) Lower earnings multiples allowed.
iii) More regulation of the lending market.
iv) No interest only and BTL loans.
v) Higher tax on second properties.
vi) More taxes on foreign investment.
vii) Lots of housebuilding.

Instead they relaxed the rules and made a load of cheap money available through the TFS (term funding scheme/funding for lending). Help to Buy (an attempt to make the unaffordable affordable) was also announced (the problems this will cause are only just about starting to become apparent), while the quality of new build houses plummeted and the number built failed to meet targets.

What they could have done was implement policy to target say a 2% per year decrease in prices over the 2010-2020 period, ensuring we are 20% down on the 2010 prices now, which would be a much better position to be in, but they decided to swap sustainability for popularity. At some point someone was going to end up having to deal with the mess.

Sorry lower LTVs !

I see thank you for explaining this. Glad you got a better deal :)

@snowbellsxox thank you, it was a 5 year fix 2 years ago, so I shall enjoy it while it lasts. I doubt I'll get a rate like it again!

Yes, but you missed the point that we knew we were mortgaged to the hilt and also anticipated rates rising so overpaid to reduce the risk when it happened- in 2009 the rates had just come down so the risk of them shooting back up was low. The risk in 2020 was much higher because the rates had been on the floor for so long. A lot of people seem to have completely ignored the risk for the last decade and now seem surprised by it. This was totally foreseeable.

Yes, but you missed the point that we knew we were mortgaged to the hilt and also anticipated rates rising so overpaid to reduce the risk when it happened-

You think you are unique in overpaying?

A lot of people seem to have completely ignored the risk for the last decade and now seem surprised by it. This was totally foreseeable

You foresaw the war, inflation jumping & interest rates rising in 2022 & how quick the rises would be. Of course you did...

Personally I would never buy with such a high LTV, or borrow against my mortgage to renovate but i'm naturally cautious.

Yes, but you missed the point that we knew we were mortgaged to the hilt and also anticipated rates rising so overpaid to reduce the risk when it happened- in 2009 the rates had just come down so the risk of them shooting back up was low.
Lots of people will have overpaid. But I also know some people who had to stop overpayments when covid hit and their income was affected, or who can no longer overpay because all their spare cash is now being taken up on bills and general living.
And what about those who bought, and then had children and had to pay an extra £1000 or so on childcare and therefore couldn't overpay?
It's great if you could overpay, but not everyone would have been in the position to be able to. It's fine to say well they should have borrowed less then, but in parts of the South often this is not an option due to ridiculous house prices, while continuing renting isn't feasible either as rents are so high.
Also, even those who could and did overpay might still be screwed. We overpaid by a huge amount. We reduced our mortgage from 350k when we took it out, to around 220k within 7 years, but even with that major effort (combined with several promotions that gave us the ability to overpay) our payments are set to increase by hundreds when our fixed deal runs out.

I feel for you. Could you consider interest only while the children are in childcare? It is likely to be easier/more stable than renting. Costs should go down as the children get older if you already both work full time

Interesting seeing the rates like that

i brought in 1999 so 6% but had a capped mortgage. Not around anymore

but meant would never pay higher then capped at 6 but if went lower we benefitted from it

had that think for 2yrs. Then fixed f0r 5 and 3 then 5

i liked to know what I was paying each month

yes prob ended up paying higher than would have done and rates started to drop but knew where we were

seems crazy been so low for 10yrs

I said a while back on few threads I thought would go back to 5/6% and many laughed and said no way

sadly seems I was right

only advice I can suggest is

extend mortgage to 25/30yrs depending how long is now

you can always remortgage and pay extra in 5yrs when kids at school and childcare will be less

or pay interest only for a few years

To be fair to the OP, financial experts have been saying for well over a decade that interest rates were at historic lows and were bound to rise sooner or later. The problem is that low rates went on so long that some younger people didn't really grasp how high it might be possible for them to go, and some older people began to say 'no goverment will let them get so high again'. Intrnational money markets (which is what drives a lot of interest changes) do what they do. If people out there don't want to lend to UK Inc because they think it's a bad risk, for covid debt, or because they think the government's financial plans are batshit crazy, government intervention can cushion that, provoke it (as in this case) or make it worse (as in this case). But it can't eliminate the possibility.

So @Supermummy88 what are you going to do

extend years of mortgage or interest only then pay more once childcare is less and kids at school

I second talking to L&C.

If you have good LTV then you might be able to go interest only for a while, we are but it's a btl do totally different situation. Interest only is far less than moving out into a rental as one pp suggested. But you might need a very high amount of equity. Even doing that for a year or so means you could squirrel away some cash. Extending possibility is your only realistic option.

Even my term ends in 2025 if rates are still high that's what we will do

Yes, your situation can really terrify anyone. It would be best if you thought about what you can do in this situation. Among the undoubted advantages of contacting a mortgage broker are the following: saving time and effort. The client will not have to make his own efforts to determine the best program; the mortgage broker will offer exactly the options that you may be interested in so that you can determine for yourself the best loan and a suitable real estate option. I advise you to use Mortgage Broker Bath based on your own experience.

£1200 isn't that much actually. I browsed the letting agents and it's about that for a bit particularly nice 3 bed to rent round here

Some people on this thread seem to be gleeful to see those who borrowed “irresponsibly” getting their comeuppance. It’s really nasty.

If you bought fairly recently without significant help you’re likely to have a high mortgage even if you bought something very modest. If you bought a house in the city near me which you could just about cram a family into you’d spend at least £300k and that would be for somewhere tiny / rundown/ in a grotty area with bad school ms. I don’t blame someone for buying a slightly larger or nicer but still very average house when that was easily affordable at the time. If you buy outside the city there are some slightly cheaper areas but you may have an expensive commute.

And saying it’s risky to buy with a 90% ltv misses the point that it’s also risky to rent long term given that your home will be less secure and rents are likely to rise over time.

Overpaying is sensible if you can do it but it’s not going to make a whole lot of difference to affordability to most people who bought in the last few years on (say) a £250k mortgage.

if they couldn't afford a property where they wanted then they should have bought in areas which were more suitable to their budget with suitable stress testing.

Canaries singing now over normalising interest rates should be ignored by those in power

@Circe7 agree about the glee. Had an acquaintance gleeful about rising interest rates finally giving him a better return on his bank account savings and quite pleased and smug about the disadvantaged. What proper Tories should have done. Was a little less happy when he took a snapshot about the aggregate effects on his pension fund and on his equity investments. Savings rates not even risen much either.

If someone’s job is in London, where exactly should they buy a house?

Mostly places where houses are expensive have jobs which pay better than places with more affordable housing. So in my area you theoretically could live somewhere where you could get a house for £200k (and a lot of people would still need to borrow many multiples of their salary to afford that) but they would then likely need to do an expensive commute to their work (commute could easily cost £250 a month each from affordable area or more if driving). If they have kids their childcare would probably be more expensive to cover the commute time or the logistics may be completely impossible. Or they get a job nearer home but most of those jobs will pay minimum wage and may not use their skills / qualifications.

And should people really have bought a house which is not particularly nice in an area which is inconvenient and which they have no connection to just in case interest rates suddenly rose by 5% at the same time as all their other bills massively increasing?

I’m not saying that the government should necessarily intervene with direct support for people - that’s a different question- but I have a lot of sympathy for those worried about mortgages at the moment and in the vast majority of cases don’t think it’s their fault that they’re struggling.

The other thing people on this thread are underestimating is the environment people have been living in when deciding to take out such big loans. People don't get taught finance at school, they don't necessarily grow up in homes where these kind of financial issues were typically mentioned. If you are 30 now you would have only been 16 when the 2008 crisis. I can't speak for everyone but I sure as hell wasn't closely following financial news at that age. A 30 year old has lived their whole adult life in an environment of abnormally low interest rates - people have said they'll go up, sure, but they've been wrong up until now. There's been a "house price crash" forum for as long as there's been an internet - those people have been waiting a long time to be proved right and 30 years later, it still hasn't happened. You can't just expect people to discount the evidence they've seen before them for their whole adult lives, that interest rates are insignificant and that even if they go up, it'll be by 0.25 or 0.5 and the impact will be minimal.

I just think it's a terrible shame that banks, brokers etc were not working hard to explain to these people that this was a very real risk. That they weren't doing more to prevent people taking out loans that would so quickly be unaffordable. There are times we really do need to be able to trust experts. And I think once again the banks got greedy and didn't do enough to save people from themselves.