Mortgage rate rise - what a nightmare

[sallynew]

hi.

I am fuming. Our fixed term is about to end and the best we can get is a deal that will add £450 onto our current payment of £1100. Not quite sure how we are going to do this.

At the moment after mortgage, bill, food and fuel we are left with about £1600. This will now be £1150. It just feels so very unfair

At the moment after mortgage, bill, food and fuel we are left with about £1600. This will now be £1150. It just feels so very unfair

Of course it's not "unfair".
Mortgage rates are correcting themselves to a more normal level, and it seems you've had quite a lot of notice of this, yet haven't been taking advantage of the low rate to put some by. Absolutely your choice, but there's nothing 'unfair' about it.
£1150 after you've paid all your bills, fuel and food and the increase is a huge amount of money "just for spends".
You really need to check your privilege.

Why didn't you fix your rate earlier with your current mortgage provider, you don't have to wait for the fixed term to run out.

Whilst I appreciate you’re not happy at paying hundreds extra for your mortgage, how didn’t you see this coming. We fixed for 5 years at the end of 2021, and I immediately starting overpaying so we can be in a good place by 2027. No matter what the interest rates are by then.

It is a hard pill to swallow, especially with increasing prices, but the rates are back up to what's roughly 'normal' and we should have all expected it at some point. I'll start to moan if they go up to 15%

I mean it's not a fortune no but it's
£400 less than my total monthly wage
My food shop for 5 months
My council tax for 9 months
Enough to fuel my car more than 10 times

It's not pennies

The low interest rates were bound to end.
It seems as though, as house prices increased - somewhat artificially - the low interest rates made it seem that the properties were affordable, based on being able to afford the monthly payment. What are the multipliers of income required for houses that start at £250,000 - when the average wage is about 12% of that?
Did people not foresee this happening?

(Yes, I lived in a mortgaged house through the 15% interest rates - but am well aware that the houses cost much much less back then, The most our mortgage payment was, was £350. But that was a struggle for us..... And I am not saying this from a smug standpoint, I lost the house when we divorced, and have rented for years now, with NO chance of escape.)

Yes, I`m not getting what is unfair either?

Agreed, there was PLENTY of notice that this was coming.

I totally get the 'unfair' thing.

I used to own a house and pay say £1000 and now I own the same house and pay £1500. I get nothing more for my money. It feels unfair to me too 😂

Like others say mortgage rates will always go up and down and have been low etc. But I see it the same as you - I wish there were more 'fixed across the term' mortgages in the UK.

Well, if you are still paying a mortgage, you have only ever owned part of the house.

The mortgage rate at the moment is far more in the 'normal' range or rates - if you look at rates since mortgages were a thing, indeed, I'd say at the lower end of 'normal'. You could look at it that those with mortgages over the last few years have been incredibly fortunate to have had such low rates for so long, if you want to talk about 'luck' rather than responding to the financial situation at the time.

Well, if you are still paying a mortgage, you have only ever owned part of the house.

Why do people always say this? This isn't how home ownership works, having a mortgage doesn't mean you don't own the house, it is in your name, not the bank's, you have a loan against it. You don't suddenly not own your house any more if the house were to suddenly become worthless. Equity and ownership are different things.

Not sure I'd class it as unfair, you'd need to be living in a house under a rock not to realise interest rates have gone up, or that interest rates were particularly low so it was bound to go up. I get it's not nice to have to pay 100s more each month, but I'd hardly be fuming about something I knew would happen

"You don't suddenly not own your house any more if the house were to suddenly become worthless"

That is right, but doesnt really address the point made? The point is that when you have mortgage debt you can suddenly stop legally owning the house if you dont make the debt payments, someone who actually owns their house without debt isn`t in that position.

Exactly, people who were sensible will have built a cash pile over those years to service the higher debt costs when the time came, or to make overpayments and reduce the debt owed on the house, not doing something like that over all these years if you had mortgage debts is quite reckless IMO. Of course people could then argue that they paid far too much for their house and it is unfair to see the value of the house drop AND the price of the debt to live there go up?

The point is that when you have mortgage debt you can suddenly stop legally owning the house if you dont make the debt payments, someone who actually owns their house without debt isnt in that position.

That doesn't mean the bank owns it, it means your house is collateral. Owners have a variety of options before repossession, legally they still own it. It is the owners name on the deeds, that's not to say it's safe, but it is theirs.

It's just an irritating non factual statement people make trying to sound clever. Few homes are actually repossessed.

You could commit a crime and go to gaol, doesn't mean you're not a free citizen today.

If we want to be pedantic, then none of us own the land our houses are built on either. The crown owns all UK land and that is fact. The crown also owns 90% of the land in Canada for example.

As a freehold homeowner I own an “estate in land” - this is not the same thing legally as actually owning the land.

The law in-effect grants me the right to act as though I own my house without my actually doing so. It’s a subtlety of law. Charlie can kick me out anytime, but probably won’t.

When you took out your mortgage the offer would have clearly stated that interest rates can go up as well as down, also your mortgage company would have been stress testing your finances for around 6/7% to allow for the likelyhood of rates rising.
What is unfair?

This ! Totally agree

We aren't getting anything else for our money just the same house 😩

I find it really bizarre that anyone actually thinks this, tbh.
Genuinely.

Surely, if you have got to the stage in life where you were ready to take on the huge amount of debt that a mortgage is (for all of us, as borrowing is related to your income and affordability) then you must have understood that mortgage rates have been at an all time low for a long time ?

You are still in a position where your payments are chipping away at the amount you have borrowed, so gradually getting closer to owning your property outright, whereas folk who are renting will be finding rents are getting higher and higher, whilst renters are paying their Landlord's mortgage, rather than their own. It just makes it more difficult to ever save enough for a deposit on their first property.

Yes, it is difficult because utilities, petrol, food etc have all gone up, but they have for everyone - people on fixed incomes like pensions or benefits, and people who are renting as well as home owners. But it's not "unfair".

That makes no sense. A mortgage is just a loan like any other. The only connection to the value of your house is the fact that the loan is secured against the house.

The sum of money you borrowed is still the same, and that’s what you owe the mortgage company, plus the interest they charge for lending it to you. It’s at a rate of interest fixed for a period, and then the rate can change. But the capital sum you borrowed is still the amount of the loan you’ve taken out. It doesn’t matter what your home is worth. You still owe back what you borrowed plus the appropriate rate of interest.

I think there's probably a whole raft of people who bought houses between 2000 & 2007, in the times of self certified mortgages and 100% mortgages who then had years of low interest rates and rising house prices so have never had to face the consequences of their risky financial decisions before.

Interest rates rose sharply between 2003 and 2007 and it felt very similar to now. And lots were left in negative equity. I remember buying mu first house at 95 PC mortgage and the interest rate I could get was 7pc.

@JingleBellez

over a thousand a month after the increase & bills... you inthink they'll be able to wriggle 🙄🙄🙄

@sallynew what are you on about? Struggle? Over a £1000 after bills. That's more than a lot of people have net before mortgage & bills. 🙄🙄🙄

@shivawn
@Fallin

£1150 a month disposable income IS a lot of money for a LOT of people, myself included.

Look down your noses as much as you like, enjoy what you have while you have it, because life can change in an instant!