Mortgage rate please advise - 1st time buyer

[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!

Did you stress test? So, that's looking at what your repayments would be if interest rates rose to 6% or 8% or 10%? That's how you really decide how much to borrow.

Sadly, timing has not been kind to you and we've seen rapid rises in a short space of time. Anyone on a variable rate will have experienced the same over that period and it's rubbish. But it is also important to realise that interest rates can go up and up and could, theoretically, go higher yet.

On the flip side, those with variable rates when interest rates fell dramatically, found themselves with falling payments. To chose a variable rate is to gamble, essentially, and hope you with over the long term.

If you need security (and many first time buyers do) then you need a fixed rate. It'll look higher in the short term and may cost you more in the long term but you will have the security of knowing what your mortgage repayments will be for X years.

The mortgage market may have changed but I was a single, FTB 5 years ago and was able to get a fixed rate. I was then able to renew that earlier this year again as a single person. Is there is a reason why single mortgage holders cannot get a fixed rate? Is that just the bank you went with or is this market wide?

Especially as a first time buyer I think its more important to have stability.

Are you in a position to fix you payments at all?

Unfortunately there is no guarantee os interest rates.

They may start to drop or may go much higher.

In your position I would want stability, even if it may be more expensive overall.

Try to fix if at all possible.

Your mortgage is behaving exactly as expected, did you fully understand? It doesn't sound like you did.
As long as interest rates keep rising so will your mortgage. No one can predict when this'll stop, bit most would expect it to stop soon.
Then it may fall, or stay the same. If you can't afford these higher payments then this doesn't sound like the right product for you.
Are there any penalties for changing to a fixed rate?
I'd speak to the lender to make sure you fully understand what's happening now, and all of your options to change.

Your bank doesn't expect you to grow your savings back, that's your problem.

Many many people are experiencing this at the moment as that is the chance you take, unless you opt for a fixed rate.

By the time you completed in December you must have been aware of the upward trend in interest rates, surely?

The safe secure option is always a fixed rate, then there are no nasty surprises.

Dear Both,
Thank you for your reply. To answer a few points mentioned:
-stress test: i did calculate a much higher rise but i wrongly assumed i will have time to grow my savings before it gets so high.
-i tried to get a fixed rate, spoke to over 42 mortgage brokers however i could only get on discounted rate, this discount is fixed for 2 years so i can try to go on fixed rate after. I had a nice 90K deposit and again wrongly assumed that will help me to get a good rate. Maybe its because i applied at exact time when market was so unstable.
-my plan at the moment is to keep the bonus payment for this year as emergency fund for mortgage. Originally i wanted to pay this lump sum so i can reduce as much capital as i can and of course that saves me a lot of money on interest, but now i will keep it in case rates go sky high again.
Thank you both for your response, fingers crossed for lower rates soon :)

@Ihavekids Thank you for your reply! There are penalties for changing to a fixed rate, i will have a full calculation to see if this is worth doing now or should i wait more to see how market behaves. I spoke to my lender and they simply said that previously variable rate never grew so quikly but now of course its a different market and they have to follow Bank of Eng.

Hope it works out

@Rowthe Thank you very much!

I really don’t understand how you’d not be able to get a fixed rate. That’s just a product rather than being eligible for a mortgage. I assume you could get one but the rate was too high?

@Idontgiveagriffindamn Thank you for your reply. It was more to do with an amount I was able to get. Most lenders only multiply salary by 4/4.5, I saved a large deposit specifically so I can get freehold house rather then lease hold(personal preference) 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.

It doesn't sound like there is much you can do other than to keep your fingers crossed that the Bank of England starts lowering rates soon.

Ah that makes much more sense. It’s specialist lending.
I think all you can do is focus on paying the capital down and then remortgage to a fixed rate product when you can.

@Idontgiveagriffindamn That’s the plan, hopefully remortgaging will be an easier process, 1st time buying definitely gave me a few grey hairs :)

@Idontgiveagriffindamn Thank you, fingers always crossed :)

Remortgaging to a different lender on the future is an option but you need to get the mortgage paid down or your salary increased as vast majority won't go above 4.5 times income as you know
It's too late now but crazy to borrow that much especially on a variable rate with rates as high as they are just now
Your mortgage payment must be a huge chunk of your income. Are you struggling at all?

@Irishka2022 How are you getting on?

@FireflyJar Hi Firefly! It is challenging for sure :) but i have no regrets, stil happy i bought it and have a plan B in place for extra income to help cover the rise. It seems rent is now going mad and would have been more then i pay for mortgage so definitely glad im not just paying with nothing to show for. Hopefully now inflation is starting to come down we will be moving towards more stability in 2024.
Best wishes!