Are mortgage rates going to rise more?!

[Namechange1377]

A dream house has come onto Rightmove, forever house material, We have joint income of £3700 monthly.
If we sell our house for £290,000, have deposit of £135,000, the house we would like is £465,000 and on a mortgage of £330,000 we are looking at roughly £1600 monthly mortgage payments, Fixed rates are 4.89% or tracker at 3.94% £1400. (35 years)

I know no one has a crystal ball, but what are opinions- are mortgage rates going to stabilise? Are they going to rise?

Should we fix, should we track?
Is mortgage of £1600 insane?!

Personally I think rates will continue to rise. It can't rise forever, but longer than people expected. Current market consensus seems to thinks BoE rates will rise to about 4.5% towards end of this year and then stablise, but forecasts in the last year have been consistently off the mark, and market data still shows strong pressures in where economists hoped to have cooled off by now. Also, once it peaks it won't go down that easily. The central banks shredded their reputation by keeping interests too low for too long, so they will be prudent when climb down. So I would do a fixed deal if that were me.

5.5 times income from the Nationwide. Remember well what happened the last time lenders lent too much..... silly lending. Rates go up, borrowers income changes, baby, the sack, redundancy, split up etc etc.... and boom taking the home back.

Why take it on and put yourself under such a strain.

Don’t tell me…you’re either ancient and bought your house 20 off years ago OR your household income is £150k plus a year 🙄 it’s very normal these days. If you earn £60k a year and need to borrow £250k plus to buy a modest home then it sometimes HAS to be over such a long term for affordability. Most people in these situations over pay hugely when coming to the last 10/15 years and shorten the span that way.

With payments at 43% of her income, the OP does not have any wiggle room to take a risk on a tracker.

If your relationship is strong I'd say go for it. We took on 1300 on 4k income and while it's tight we are crap with money so not in a position to give advice! Good luck op and update us

I'm surprised at people saying this is 'crazy'.

I know many people who can't get on the housing ladder and rent for a decent two-bed place around here is around £1600pcm so paying that into a mortgage seems ok.

43% of income going on the mortgage would be much more of a problem if it was of a lower income but on OP's joint income it leaves £2100 monthly for insurance, cars, bills, food, all other expenses which sounds fine.

Set your mortgage at a level one of you can afford in case of illness or redundancy.

Are you looking to have children? Would you still afford it on maternity and what if a child needs more care than you anticipated.

And yes. Rates may go up again. You need a buffer just incase.

I think a mortgage of £1600 over 35 years with your income is too risky . It will be a large percentage of your income tied into your mortgage .

For those asking we have one child who is 5 years old and no plans to have anymore.

I am a little surprised too , when I look at friends who rent and pay £1200 pm that seems crazy to me

We stretched ourselves and have a £1600 for our forever home. Our children are 5 and nearly 7.

We were going to go for a smaller, cheaper property but my dad made the point that the next 10 years are the ones where we will spend the most time together as a family. If we can do it in a house with space to play and entertain friends and family then go for it.

I would go for it tbh at your age.
There is a lot to be said to pushing your finances to the limit when you're younger and planning no more children. Wish I had tbh when I was young enough to do so.

@bumhug thats what I'm leaning towards, stretching now whilst we still can and we can fully enjoy the house

And again for everyone saying larger house bigger bills, I have said its the same size house basically but In a nicer area and more outside space.

I think you should go for it. If it’s your dream home and you need to make a few cut backs it’s not the end of the world. You are both still young so hopefully over the next decade, promotions etc will help you to eat more into the mortgage.

Thanks everyone for your opinions and thoughts, it has been very useful and certainly given me some things to mull over this evening ! X

Have you checked the council tax banding?

We're in a similar situation, take home £4.2k combined and our mortgage is just under £900 pm.
This feels enough tbh, once youngest goes to school from nursery I'll prob work an extra day and we plan to overpay. But no more than £1000 total a month I don't think.
It does depend on how much you spend on other things tho I agree, we're also in the same mindset that we like money for hols, trips out and hobbies so wouldn't want such a large chunk going on the mortgage

If you do go for it negotiate HARD on price, house prices are still likely to fall and many markets have slowed right down. Equally expect your buyer to negotiate hard too!

I personally wouldn’t want a mortgage that high with that income, but I’m very risk averse financially. I like to keep outgoings as low as possible in case of job loss etc.

If the worst happened and one of you lost a job do you have savings you could dip in to or financially sound parents who would help you? Or would it be reliant on you both having the income you have now?

Are you factoring your fees into your calculations too. Stamp duty, buying/selling costs etc?
I'm pretty risk averse when it comes to money and the repayments seem like a large chunk of your income. Do you have loans, credit cards, subscriptions that would eat into your disposable income after mortgage payment?
Will you be able to make any regular savings?
I've always borrowed less than the absolute maximum just to allow me to have a decent buffer especially at the moment when all costs are rising on a regular basis.

I was recently advised to fix for 2 years as market experts are expecting things to plateau in around 18months. But only plateau not drop significantly.

I think this is a bit crazy. What if house prices decrease and your £465k house is only worth £400k in 18 months time ? Then you need to borrow your ‘ported’ mortgage in 2024 and your LTV has fallen and you can’t secure the additional borrowing - what happens then ? I think this is a massive risk, you’d do better to take out a whole new mortgage, I guess that would mean an early repayment charge.

£1600 on mortgage plus £500 on council tax and energy together doesn’t leave you much headroom for food, repairs,

Sorry posted too soon, I think it’s too tight with potential house price decreases, I think it’s the wrong moment for this type of risk unless you are certain your wages will increase.

If it's the dream house I'd go for it. Once you're in you have choices. Earnings may increase, rates may change.

We are in the same position as you in terms of percentage of earnings going on mortgage for quite an eye watering amount however for the dream place it's absolutely worth it in my opinion.

Thank you for the prompting re Council tax! Luckily its only in the next band up, so an increase of £20 a month

Do you have any savings?

If I was going to stretch myself that far then I'd want something in the bank for emergencies.

You need to sit down and work out all the other additional costs like council tax, electric etc.

I pay over 1k a month on an income £500 lower than yours. But I am not trying to add to savings as we have a buffer and that includes an overpayment I could drop.

It's the lack of options like extending the term further if you face redundancy that would worry me most