Mortgage payment increase…

[HolyGuacamole28]

Our 2 year fixed mortgage rate runs out soon. I knew we’d have to pay more but it’s going up £800 to £2.5k!!! I’m really shocked and scared. We have two kids in nursery and life is not cheap and both me and DH work already work full time. Want to cry. Anyone else facing the same?

Actually I don't think this is true. In the Autumn Statement NIC went down and the only ones not to benefit are those who are retired. Once retired you no longer pay NIC's but still pay income tax. So the government did do something to try to make things fairer for working people but not those on pension. I'm older but won't be voting Conservative. Not all older people vote Conservative.

To be fair that's quite a unique set of circumstances - if you've maxed out your borrowing and have a pretty horrific LTV, you've really set yourself up for the perfect storm.

Can you earn more? It may even be worth looking to downsize if this is such an issue - I usually recommend to friends looking to buy that LTV needs to be below 85% to get better rates.

I think it's from the ONS dataset on housing tenure.

The figures in the ONS are pretty shocking tbh. In 2013, outright ownsership and mortgaged ownership were pretty much equal. By 2021, in the UK as a whole 37% of dwellings were lived in by owner occupiers but the number of mortgaged/secured loan occupiers was down to 26%. 20% are private rented and 17% socially rented.

That represents 2 million more homes owned outright which tbh wouldn't be much of an issue if we'd built homes at that rate - instead there is a drop of nearly a million that are mortgaged.

Im in an outer borough of London - when we bought this house in 2012, 29% of homes were owned outright and 35% occupied by mortgaged owners. That's now flipped to 35%/28% - and 28% is high for London. Boroughs like Kensington and Chelsea have 12% of residents who are mortgaged owners.

There is however a lot more rental in London than in other parts of the country. You look at the SW - similar levels of mortgaged ownership to outer London (hovering around 25% overall) but owner occupied rates are well over 40% in almost every district.)

I think we all know that not all older people vote Conservative and I was pretty careful in how I set that out in my post.

I'll agree the NI cut was targeted m but when you look in context - inflationary increase in the state pension when public and private sector wage growth was well below inflation - it's harder to make the argument that there wasn't a balance of fairness at play, and it's utterly dwarfed by the intergenerational wealth transfer that has happened over the last decade or so (as well as the NI increases over the years that were targeted at working age people, partly because rhetorically it doesn't sound like a tax and partly because of the Conservative core vote.)

* Edited here because I wasn't clear that I was talking about longer-term pension growth than just last year and I probably wasn't being fair to your argument that there has indeed been a change that has been targeted at working people. I don't think affects my overall argument that you won't see the huge structural changes we need to planning, education and taxation to restore any sense of balance *

None of this is the fault of people who have benefited any more than it's the fault of people who have suffered as a result. It's the abject failure of successive policymakers that have left us in this mess.

It would be interesting to know what your loan amount is op.

As pp have said, either you need to earn more (or your dp needs to get a job with a secure, reliable and decent salary) or you need to downsize. Both will make your mortgage more affordable.

If you have only been a homeowner for a few years then yes, your ltv will still be quite high; unfortunately stretching to 90% as a ftb with an unreliably-salaried partner was quite a risk when rates were so insanely low .

I benefited by £14 a month.

I strongly recommend you speak to a broker. I use London and Country.
There are ways to reduce your monthly repayments (mainly choosing a longer term or going interest only for a period) but a broker can talk to you about your options and find a good deal.
Ours has gone up from 800ish to a little over 1k with a 3.9pc interest rate - which was a big jump but not crazy. Had we not used our broker it would likely be a lot higher.

We’re in the same position with five year fix (2.11%) and our 20% help to buy loan interest-free period finishing this summer. I worked out that we are financially better off keeping the H2B loan separate for now, because the interest rates on it for the next ten years are likely to be lower than mortgage interest rates so folding it into the mortgage would cause the double whammy of paying larger interest rates on the H2B loan AND making our LTV shoot up (it’s 58% if we don’t fold H2B in).

The only way we’re better off folding H2B in now compared to paying off ten years from now would be if our house price doubled from what we bought it at 5 years ago (extremely unlikely) because the increase in H2B loan value that we’d need to pay back would outweigh the savings from not paying mortgage interest rates on it.

I realise this “benefit” all hinges on being able to pay back the loan within ten years (we’re planning to pay 50% in five years and then the remainder in ten years, or 50% in five years and folding the remainder into mortgage in five years if mortgage rates have come way down again!!), but we’re so in love with our house and would have to downgrade so much (to house around £200k less) to see a significant difference in monthly payments.

When I was crunching the numbers it had a distinct feeling of gambling, banking on house prices doing one thing, interest rates doing another, income and outgoings staying the same etc. 😓I hope we’re making the right decision for us but I guess time will tell.

@Slytherfish Yes, it all does feel like a huge gamble, I agree.

I suppose we're in a luckier position in that we're not huge fans of the area we live in as it's a new build development. The house in itself is nice enough but a new build was never our dream home, it was just all we could afford at the time and we'd never planned on living here long term. Another fortunate thing is that a lot of people DO like our area and the value of our home has increased by £50k in the three years we've been here.

That's why using interest rates to control inflation is an approach that falls so highly on a relatively small percentage of people.

When you factor in the number of people who have fixed rate mortgages, the percentage gets even smaller. Which is probably why raising interest rates hasn’t brought down inflation as fast as was hoped. It was different in the 1970s when virtually everybody had a variable rate mortgage.

@Oakbeam Perfectly put. It's a very poor tool and yet really the BOE has few others at its disposal. It's an even worse tool when you consider that the current inflation crisis is a supply- not demand-side driven one!

The figures for owned without a mortgage probably tally with the percentage of population over 55.

I should own mine before 50 but we have stayed in the same terrace and won't move again. No help, no value increase on previous flat, but continued to pay the mortgage at the 'rate' (monthly cost) I took it out (a tracker which was 6.25%) in 2007. Didn't want to get used to an unrealistic level of repayment.

I think your only real options if you definitely won't pass a remortgage are to opt for the best rate with your current lender and increase the term.

However, I would set up a regular overpayment up to the value you can afford, whether now or when child care costs come down. That way you are not committed to a high rate on months the car needs repairs or the boiler breaks down but can still pay it off close to the original timeframe.

Hopefully your outgoings will come down once nursery is done, your husband's earnings will go up and you can improve your LTV for the next time you remortgage. For now you just have to find a way to get through the next couple of years.

Check out NatWest there rates looks good yesterday when I checked

@caringcarer From this Guardian article: "The impact in London is concentrated, however, as less than a fifth of households in the capital have a mortgage." It's slightly unclear to me whether that means households overall, I suspect it does. It therefore reflects the fact that for example social housing in London isn't mortgaged, etc, and there's lots of that. But it does capture rental properties, as it will include any rental properties that are mortgaged by the landlord.

https://www.theguardian.com/money/2022/oct/15/uk-families-mortgage-rising-resolution-foundation

£400k. It is a lot but I’m a high earner. My husbands money is erratic month to month and suffered after Covid. It’s v depressing all round really and the nursery fees don’t help.

Ours had gone up even more than that. We have shopped around and that's the cheapest we could find. We are fucked basically. We can afford it but it will wipe out our savings over two years and there will be no money for anything else. We will sell the house if we can but there are four houses for sale on our road probably similarly priced to what ours would be, and nothing is shifting at all.
We had to buy this house specifically when we bought it due to kids other parents locations and schools etc. It was the only one on the market where we needed it when we needed it and that would fit us all in. The mortgage was affordable if expensive at that point and we have just been caught by the timing of the term ending and the interest rates.

OP, if your husband is a very low earner, is it worth working out how much he earns vs how much you spend on nursery fees? You may find you'd be better off if he became a Stay at home dad.

It’s a fair comment. And been discussed. But he won’t. He also won’t give up his business. It’s very frustrating. He earned more when we met. Sigh. I just didn’t marry (financially) well but he is a decent man.

When does your current fix expire?

You can usually cancel your switch and change rates until a few weeks before the new date. The rates are forecast to come down this year.

You have my sympathies- it’s very easy for posters to say your DH needs to go into full time employment and close his business. But when someone is in that position, it can be tied up with their self worth and passion- especially if it’s something they’re really good at but the market around them has changed. You invest so much in SE/ small businesses that it becomes a sunk cost you’re unwilling to lose. There’s also “what if this is just a blip?” … but usually it’s the start of terminal decline and dying of the business.

Eventually though your DH will need to face the music and perhaps this financial shock will kick him into action…. Change his business model/ market, wind up his business or whatever. Keep talking to him and sharing the problem, trying to come up with options together. Don’t get angry at him/ blame him for your financial situation, but try to get him to own and solve the problem, supporting him along the way. Open communication is key. Make it absolutely clear you won’t be taking out loans etc to sub the business and expect to see a plan for business recovery with deadlines.

Speaking from experience here. Eventually he will see if it’s become untenable but he needs to come to terms with it and that can be really difficult when you have poured your heart and soul into it.

This. Your LTV is awful and your mortgage is gigantic. That being said, it has to be done by some to get on the property ladder.

TBH I think if your DH is refusing to give up his business when doing so might actually help finances then that's a very unattractive quality and worth of another discussion. He could get a job around your hours to bring in more money tbh (i.e. one of you at home in the evening with the kid whilst the other works nights)- if he was really committed to being helpful...

Can you go interest only JUST for the nursery years? And overpay when you can?

You've had lots of advice so I just want to send commiserations. Our mortgage fix ended in October 22 but we were going on the market to move and couldn't fix. It felt like it was doubling every month until we finally completed in August 23

Then you don't have a mortgage problem, you have a dh problem.

£400k is a MASSIVE mortgage, and an extra £800 a month on top of your existing payment will be shocking. Does he not accept in any way at all that he can do something to alleviate the financial pressure?

Is that really the best that zBarclays would offer you? Have you checked? We are out the other side now but always found Nationwide just offered us the lowest rate in a few clicks of a mouse.