Govt and mortgages

[Madeyemoodysmum]

I know this will be unpopular but it's driving me mad

Ok, the recent mistakes by truss have been monumental and they have lost
My Vote which was teetering Anyway

But interest rates
We're NEVER EVER going to stay this low forever

The govt can't protect you and bail
You put on everything

If you are over stretched then you need to Be honest with yourself.

Rant over. And feel
Free to pile On.

@Grumpyoldpersonwithcats @whenwillthemadnessend sorry thank you, yes I do need to speak to them. Everything just seems so fucking bleak. I don’t ever struggle with my mental health but my entire life is unravelling before my eyes and I’m wondering what the point is. I’m such a meticulous planner and put aside money for a rainy day fund and when DH lost his job that got eaten up so we barely have savings. And his lower income has meant we are struggling anyway. And he’s not been at his job 2 years yet so they could let him go at the drop of a hat. And we waited until DC1 was in school so we could afford DC2 which ended up being twins, can’t afford childcare for them both so looks like I’ll have to quit my job which I don’t want to do. And shit like childcare being so expensive is absolutely something the government should be doing something about. I get OPs point and I don’t want the government to bail me out, but things like realising that our expensive childcare sector forces women out of work would be a nice start. Giving people employment rights before 2 years would be another. Raising the rate of stat maternity pay in line with the cost of living would have been nice over the last 8 months too.

Until last month my bank was offering long term fixed mortgages at around 2.5%.

If THEY couldn't foresee this, it seems cruel to expect the average person to. Most people who buy homes just want somewhere secure and comfortable to live. If they have 'over stretched' themselves it's because prices meant they had to pay much more for this than previous generations and/or they have only ever known a time when interest rates have been low.

It's all well and good saying they were higher in the past and so were inevitably going to rise again, but people had little evidence for if and when that might happen - and so were forced to gamble with thir homes and hope it didnt happen in their lifetimes or hope that WAGES would increase at similar rates.

After all, if we use the past to predict the future than high interes rates should go hand in hand with high wage increases. But they are not.

I say all that as someone who has a good fix for a few years and can afford significant rates afterwars (i.e. I have no personal skin in the game) but it would be willfully blind of me just to tell people it's their fault for suddenly struggling with massive increases over a very short period, the like of which the banks themsleves didn't appear to foresee.

What WOULD be useful is for the OP or others to tell us all what interest rates are going to be in 2027.

If it is so obvious to foretell, do let us all know so we can plan accordingly

What WOULD be useful is for the OP or others to tell us all what interest rates are going to be in 2027.
If it is so obvious to foretell, do let us all know so we can plan accordingly.
Hope for the best, plan for the worst

Best - I would guess 4%. Worst likely 8%+.
Don't think we'll see the historic lows of the last 10 years again - it's a model that clearly hasn't worked.
House prices - best estimate house prices stay stable. Worst case complete crash & 40% drop?
That's what I'm basing my personal financial decisions on.

I live in the south. There was no over extending here, we had to pay a ridiculously high price for a very average family home simply because interest rates were so low it drove prices sky high. It's not so black and white. I hope now interest rates have gone up that prices will adjust accordingly.

"Like seriously...this is your debt and your responsibility. What 'should' be done? All house owners get a subsidy maybe that the whole country has to pay back? Bollocks to that"

In that case, only people who benefitted from furlough during the pandemic should be paying it back, not the entire country being screwed like we are now! Your debt, your responsibility, right?!?

I agree that the government should not (& will not) have to bail out mortgages. The lenders will stress test affordability but that was before the cost of living increased dramatically.

Still think people need to educate themselves about mortgages. I've only ever paid around 4% ish as fixed for 5 years in 2007 and then it went down when we came off fixed so we kept that mortgage, overpaid then paid it off in 2 more years.

To anyone with any sense it was obvious that recent rates were unsustainably low. Being financially illiterate is not an excuse.

It’s not just the mortgage interest rates, though, is it?

DH and I bought when the Bank of England interest rate was 0.25%. We did not expect that to last for the length of our mortgage.
That’s one reason why we didn’t go for the maximum mortgage the bank was willing to lend us.

What we did not expect is for mortgage interest rates to start rising at the same time as gas, electric, petrol and food prices are rapidly rising, combined with stagnant wages.

Interest rates have been below 1% all my adult life. When I bought a house at 30 years old I will admit I didn't consider interest rates from before I was born, I don't think that is weird. A lot of people my age have never considered interest rates because they've been basically irrelevant to us. I've never earned interest on savings and I've borrowed money interest free all my life until I took out my 1.75% mortgage. That might make me naive, but when you've never known anything different this is all quite an adjustment.

What I want most is the govt to invest in is the nhs/schools/business rates /police I could list stuff forever.

I'm fed up of people expecting a bail out for everything that happens in theWorld there will Never be money for the above if we don't take responsibility for our own actions and getting a mortgage is our own action.

Perhaps mortgages should
Be taught in school in Maths classes

It would be much more useful
Info to most rather than Pythagoras triangles.

I totally agree that Personal Finances should be taught in school as part of maths.

Mortgages, savings, credit cards, loans, insurance, compound interest and how to track your spending etc. Would be a very valuabale lesson for everyone, I think.

So where do people go? What do people live in? The rentals here (we've thankfully just bought after years of deposit saving, mid 30s- our landlord decided to sell earlier this year now paying £300 less than what we paid in rent) are going for £800+ and they're being snapped up within hours of going online , most rentals are being sold, there's no social houses being built (which we would of happily lived in)

I don't blame anyone buying a house for security. We are very very grateful to be off the rental roundabout and the stress it has brought.

Women also wanted freedom to work and earn so they weren't financially trapped by some grunt of an excuse of a male and so that they could get mortgages by themselves, again freeing them from any grunts.

I thought there was a rule that the bank had to stress test you to 5% or something like that.

So what happened there then ?

Also, I believe that some of the recent rules on stress testing have been relaxed. Probably cheered by the property sector, but not very prudent though.

The government will demand the banks do something otherwise their rich housebuilder funders will start screaming and we can't have the homebuilders upset because they need to earn £100K profit on each thrown up rabbit hutch they build don't they?

And the banks clearly haven't learnt enough from 2008 Northern Rock, they should have all stress tested for at least up to 5% interest rates, we got stress tested up to 5%, 5 1/2 years ago. So not sure why that stopped? Oh yes I do it because their housebuilder mates can't sell their rabbit hutches at £100k profit.

And really no one should be gloating about being so wise they wouldn't have ended up in this situation but uncertainty in the market, housing slowdown, people in financial hardship, will affect every one somehow. Some pension funds are in housing stocks, removal firms, carpet fitting, new bathroom companies, so many businesses depend on a buoyant housing market. It will bring stress to families, family breakups, unsettled households for the children, no treats, holidays, just a miserable, stressful existence. But I guess for some the more people who are in the gutter the higher they feel. These are awful people, the ones smiling through net curtains and you have to hand the family car back.

I wonder if stress testing assumes that other costs would rise too ? Isn't 10% inflation, something that the UK last experienced in the 80s?

Out of curiosity I just checked right move for rentals. You know, if I cant pay my mortgage I can just rent right??

So, the fact a rental property smaller than my house and in a worse area than my house, is £300 a month MORE than I'm paying, well...that doesn't make sense does it.

I hope all the BTL landlords who buy up huge swathes of the new builds are okay charging low rents for everyone who lost their homes to move in to. I mean, surely they wont have overstretched and bought a BTL at an inflated house price, surely not!!

Tut tut tut, but that's guessing again.

We "guessed" at a 5% rate, hence the stress test. But we couldn't have guessed a pandemic, followed by an idiotic furlough scheme, followed by an insane war, rising utility prices and an idiotoc mini budget would happen.

You may "guess" but the PP clearly said she wants to know exactly WHAT the rates will be in 2027 so she can plan ahead and not overstretched, as guessing is fallible, you know, like the current guess work up till now has been.

And the banks clearly haven't learnt enough from 2008 Northern Rock, they should have all stress tested for at least up to 5% interest rates, we got stress tested up to 5%, 5 1/2 years ago. So not sure why that stopped?

they only stopped stress testing recently. No one for saw the inflation of other expenses though.

I can't believe some of these smug comments. Although interest rebates were due to increase they weren't meant to increase at that speed. As someone has said before a 6% rate is equivalent to double figure interest rates in the past, combine that with a ridiculous housing market and the energy crisis (caused by a war) people are going to be squeezed beyond a point that is going to be possible for some.
I'm sorry you can't plan for everything. So yes I'm going to feel sad about the extra £500 I'll be paying a month and all the sacrifices that means for my family. We work hard and have never been imprudent but have had to deal with a pandemic, where my husband was furloughed, then made redundant followed by this shambles. How on earth could we have known?!

We were never ever paying less than around 5%. I think maybe we were stuck in a 5 year fix- we were certainly never paying 0% I think I would remember if that was the case ! Of course it may have been different for others.

How old are your twins ? Could you do some kind of evening work around your dh just until they get the 30 hours funded at aged 3? We had the same problem - 3 small children and couldn't afford childcare but just about managed it with working around each other. i appreciate not everyone can do this of course and it's not easy. I hope you manage to find a solution.

What a stupid post. Young people have had no choice but to 'overstretch' because house prices are so high. It's either that or pay even more in rent, lining the pockets of landlords and having nothing to show for it.

Interest rates have been low for almost 15 years. How long are people supposed to wait to get onto the ladder?

I'm lucky that I live in the north and so my mortgage isn't too high, but friends in the South had no choice but to borrow £200k plus in order to get onto the housing ladder. Some had to pay £500k plus for a very basic 3 bed to house their family.

This reminds me a bit of when energy prices started to rise and some firms folded.

There were a few on here who were adamant that if you were a customer of a failed energy company who had been kicked onto the SVR with a new company (& therefore could no longer get a fixed rate), it was your own fault because 'it was obvious by going for the cheapest energy quote that you had chosen a company with an unsustainable business model'.

You should have known that they would go bust sooner or later and planned accordingly.

Those posters all went pretty quiet when the prices kept going up and up and threatened to hit everyone by £000s.

I agree with OP in as much as this WAS always going to happen. But I feel so sorry for the young people who are caught up in this. I can totally understand how when you've never seen interest rates above a couple of percent it doesn't seem possible that it would ever happen. I can totally see that you would overstretch yourself with current house prices, without actually knowing that's what you are doing.
What I totally can't understand is how the banks let people do it to themselves. They are supposed to check "affordability" on the loans they agree. They literally ask if you think you can still pay at higher interest rates and I assumed that when they were testing "affordability" they were assessing if you could still afford to pay at those higher rates - when I remortgaged last year I remember having that conversation with the bank and I assumed that there was a reason why we discussed it, but it's obvious now that they would agree you could afford if if you said you could afford it. That's fine for older people who are still quite amazed at how interest rates have been so low for so long and see 8% as a very real possibility - but for the young people who think it's a fantasy figure need proper guidance.
It frightens me how many people are out there quite convinced the government will step in and just insist on lower interest rates to help them out, or who think current rates are a blip and rates will quickly go back to "normal". There's so many who don't believe repossessions and housing crashes actually happen and that the Bank of England sets interest rates purely to help homeowners. I'm worried that there are lots of people who could protect themselves now that are going to get massively caught out in the future because they think the media are just scaremongering.