Mortgage rate grows every month

[Irishka2022]

Hi All!
I hope everyone had a good Easter break! I was wondering if anyone in the same situation as me. I just bought my 1st house, completion was 1st Dec so had my mortgage application while market was going crazy, applied in Aug, was granted mortgage in Nov. Since the initial application I have not yet paid same amount twice. As a single buyer i could only get a discounted rate (2.5% discount from variable rate) so not fixed. I wasn't naive thinking it will not grow however I did not expect to receive a letter every month confirming another rise. In terms of numbers - initial monthly payment was £1,080 it is now up to £1,500, it literally grows by nearly £100 every month since i was granted the mortgage. I'm of course very worried as I expected to have a few month between payments going up, I'm not sure how does bank expect me to grow my saving back again if they raising payment every month. Has anyone had something similar this year? I'm just trying to figure out how to budget every month for new amount :( Any advise will be much appreciated.

Thank you!

What's your current mortgage rate, initial term and early repayment charge?

Fixed rates have dropped back a little since late last year, so it might be worth seeing if you can swap. But I've never heard about FTBs being denied a fixed rate. Are you sure? That seems to be the very opposite of responsible lending?

Rates have been going up at every MPC meeting.

Last meeting was +0.25% on 23rd March., which was half the rise of the previous two meetings (+0.5%), so your last (or maybe next) rise should be less than the previous ones (?)

Next BOE meeting is on 11th May, but the FOMC meeting on 2nd-3rd May is normally a good indicator of what the BOE will do.

From what I can tell the market thinks the Fed will raise by +0.25% in May and June, which probably means the BOE may well do the same. None of this is guaranteed of course.

@BarbaraofSeville Thank you for your reply. My rate now is 5.14%. Initial term is 35Y. Early repayment charge from Sep 2023 onwards will be about 5K (2% of capital balance). I will definitely look into swapping to fixed rate if i can get better % long term which should balance out the early repayment charge.

@GasPanic Thank you, this is very useful.

As a single buyer i could only get a discounted rate (2.5% discount from variable rate) so not fixed

Ummm... Who told you that? Why do you think that someone buying a house is only allowed a fixed rate if they're buying jointly?

You could have chosen a fixed rate, if stability of repayments was your priority. Did you speak to an adviser, or did you apply online?

@LordEmsworth Thank you for your reply! Apologies i meant above that i couldn't get fixed rate from my present lender. Problem i had that most lenders only multiply salary by 4/4.5, so even with high salary it stil wasn't given me much as single buyer, I saved a very large deposit so I found only two lenders that multiplied my salary by 6 and with a deposit that was the amount I needed. 1st was my present option and 2nd was actually on fixed but it was fixed for life product so 35Y same rate of 5.8% which seems just way too long, with very high early repayment charges. Hope that makes sense.

At some point, interest rates will stop rising and it will become more stable. But as you’re on a variable rate (tracker), every time the Bank of England raises the base rate, your mortgage will go up. That’s just how it is on the product you chose.

Inflation is coming down now, so hopefully interest rates will stabilise or drop a little. But there might be another couple of point raises first.

how does bank expect me to grow my saving back again if they raising payment every month

They don’t factor that in. They just want you to pay your mortgage according to the terms agreed. There’s not much to be done except tough it out if you are tied into an early repayment charge and haven’t built up much equity yet.

So it's because you had a very niche product that limited your choice, not the fact that you bought by yourself or are a FTB that meant you could only get the product that you did. There's a reason why normal multiples are no more than about 4/4.5 times salary.

Did you buy through a broker? Did they not point out the risks of such a large mortgage that was a variable rate? Did you need to buy such an expensive property (6 times salary plus a large deposit?).

But what's done is done. Could you get a lodger? Otherwise, it could be worth remortgaging when the ERC drops to £5k (is it significantly more than that now?) Moneysaving Expert has a calculator that can help you work out if it's worth changing to another product, but if your income multiplier is still high enough to exclude you from most mainstream products, your options might be limited.

https://www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator/

(It's aimed at fixed rates because that's what most people who have to pay a penalty to change have, but it could also work in your circumstances, you just have to bear in mind that you have the additional unknown of changes to interest rates).

Apologies, I should have said 'large mortgage relative to your income', as it could be that you're a lower earner, rather than have bought a very expensive property, but that probably doesn't align with being able to save a large deposit if you're a lower earner.

I’m confused by the product you’re on and the figures you’re talking about. What is your salary op, how much was the property and what deposit did you put down? That might clarify the answers you’ll get tailored to your situation at bit better

OP you have overstretched yourself having a 6 X multiplier. You will have to strap in for a bumpy ride. Interest rates might go up again once or twice before stabilising. In the longer term they will likely come down to the rate you started on. Taking a variable rate mortgage is always a risk.

Dear All, thank you for your responses. Apologies, i didn't mean to confuse anyone. To break it down - salary 52K, deposit was 90K, property cost 385k. Regarding a property - it's 2bed Victorian house in Kent. I would have waited a another year to top up deposit more but due to unforeseen circumstances i had to urgently buy this year. I used a broker who of course explained about SVR rise however i wrongly assumed the rise will not be on monthly basis. I did stress test also but yet again thought i have more time before such large growth. I hope from next Sep market will be more stable so i can change to Fixed rate and pay early repayment charge which will balance out in long term if % fixed rate will come down. For now back up plan is to keep this year bonus as emergency fund for mortgage rather then paying it lump sum to reduce my capital.

If/when you remortgage, you could find it beneficial to pay as much as you can off the balance, rather than keeping it as savings (providing that your income is reasonably secure) as it will reduce the income multiple required. If you can get below 5x LTV, it could open up a wider choice of lenders.

@caringcarer Thank you for your reply! It will be tough i understand, but i hope i will get some stability next year. For now I'm carefully planing every rise and budgeting ahead, also keeping an eye on the market so i will be ready by Sep if there is an option to move to fix rate.

@BarbaraofSeville Thank you for your reply! I will defiantly try to cover as much capital as possible this year and then from Jan 2024 i will see what my options are with other lenders.

We're in a similar position and it's crippling us, we had to get a bad credit mortgage absolutely no other option at the time as landlord needed house back unexpectedly and we now were priced out of the rental market I'm full time carer to disabled child and my partner works 50 hours a week minimum wage so we're very limited to what mortgage we could get it's now sitting at a ridiculous 11.8% and continues to go up each month having to use our child's dla to pay the sodding interest

@Sprinkles21 Thank you for your reply and I'm so sorry to hear you straggling, i wish there was more help available for your family! Don't lose hope Xxx

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Unfortunately this country does not value financial education x

Fed did indeed raise by 0.25% yesterday so for me a rise of 0.25% at the minimum at the next BOE meeting is pretty much nailed on.

Scary... not sure how much more we can all take of these rises

Check with your bank what would happen if you paid your bonus as a lump sum to reduce capital/interest and then rising rates meant you couldn’t meet full payments. Generally there are options to pay back only the interest for a period of time and those I know who did it didn’t have any impact on credit rating. If you already made an overpayment to reduce capital and payments remain affordable then you’ll be fine and paying slightly less each month. If you are not ok but can drop to interest only for a period you wouldn’t really lose anything. Worth giving lender a call to see if it’s an option.