Mortgage hike misery 😔

[Bexbiscuit]

Hello,

we met with our broker today to look at our options as our fixed rate is about to expire.

the cheapest we can get is 2k a month. 2 fucking K. I cried in the car on the way home.

this is an increase of about £710 per month. We will manage it but it’s going to change our lives significantly.

we both work on good jobs with a joint income of 100k but this increase, coupled with nursery fees, utility bills etc etc we are going to be very close to the wire

just how is this situation sustainable?

It's a big rise and even if you are able to make it work, it's bound to be a huge financial and emotional adjustment.

Folk have suggested extending the term and interest only as temporary solutions until your childcare costs go down. It's nice to have options in a crisis but if you can manage to weather this storm by reducing other outgoings, I think that would be a wiser step. It's not worth adding years to your mortgage to fund maintaining a lifestyle you can't afford.

I don't know the comparative costs in your area, but sometimes if you have two young children then a nanny or childminder can be more affordable than nursery fees.

Downsizing is a painful (emotionally and financially) option but it is worth taking a good hard look about whether you can afford this house or whether it is going to be a constant source of financial stress and you'd all be happier and more financially secure in a smaller property.

I've found the Ramsey show's baby steps to be helpful. It's US based and a more debt-averse, conservative version of something like Martin Lewis's advice. You can find their radio show/podcast on YouTube.

Their affordability test for housing is a 15 year fixed rate* mortgage where the payments are no more than a quarter of your after tax income.

Leaving aside the term of the mortgage for the moment since you are already in it, I'd look at whether your mortgage payments are going to be a lot over the 25% mark. If it's just going to be tight for a year or two whilst your kids age out of childcare, that's one thing, if the mortgage is going to be a huge burden long term, I don't think it's worth it.

If you have debt other than the mortgage, I'd use your savings to pay it off and free up your monthly income from the repayments. Though obviously in general having an emergency fund is a good thing.

High outgoings can mean that even folk on high salaries can have money stress, the good news is that you've got options.

• Ramey really recommend a long term fixed rate to stabilise your biggest expense, variable rates are for the mortgage company's benefit. You can always refinance if rates come down substantially. 15 years, because their principles are about freeing up your income from payments rather than living in perpetual debt - many of their followers pay off the mortgage early.

Ramsey*

They are predicting drops back to 3.4-8 in a few years. Just extend the term for now.

Lots of nurseries don’t accept the 30 hours.

£325k @1.5% is £1300 per month over 25 years. £325K @5.5% is £1996 per month over 25 years. So no, OP probably isn’t lying. Those are the sorts of increases that many people are seeing. My own mortgage went from £2000 to £2600 and we re-mortgaged earlier this year before the interest rates got as high as they are now.

Gosh what horrible comments about how many years you’ve had low rates. In our case the answer would be 5 years as we are new buyers and will now be facing a scary hike like op. We also pay nursery fees and it’s just crushing to try and pay so much childcare plus mortgage. I don’t have any advise just sympathy - it’s so rubbish.

Lots of people are seeing this level of increase if they are going from an interest rate of 1.5% to 5.5%, or similar. So you are the one who is wrong. Maybe you should apologise to the OP rather than come on here and accuse her of lying.

Er no, a joint income of £100k is around £6k per month after tax if both partners earn £50k each. That leaves £4k per month after the mortgage. Given that OP has two DCs under 4, two lots of nursery fees can easily be £3k per month. That leaves them with £1k per month for everything else, all other bills, food, petrol/commuting costs, clothes/shoes for the kids….It’s not difficult to see how things can become tight if you add childcare costs into the equation.

I am looking to buy having been unable to afford anything in the South East as a single mum for the 20 odd years I’ve lived here. I can only afford 325k max which you can imagine doesn’t get much in the SE. I really don’t want to take the full amount they’d let me borrow either as repayments are insane, looking at almost 2k which is over half my salary. I’ve just been looking at part time evening and weekend jobs as my kids are 15 plus now and stay with dad half the time anyway. But being in the higher tax bracket I would end up getting about 50% of it. But still, that’s a help so thinking of applying for some weekend roles. I’m on 61k and you’d think I’m sleeping on a sofa bed in the holidays when son’s back from Uni (he’s got a room at dad’s 15 mins walk but stays with me 80% of time as I’m near the train station for his summer job). Even when I buy I can only afford 2 bedrooms, so same position.

My other option is I keep renting for 3 more years and try and save as much as I can towards a bigger deposit and then move back up north where I grew up (can keep my job, I’d just go onto a national salary, maybe 5k less). Then I’d be able to afford a 3 or even 4 bed house if I wanted, garden, drive etc. Still have family and close friends there. It’s so depressing and I know others are in a much much worse position than me.

What tiny places? They are all rentals and no one is building new ones. plus, by the time anyone can afford to buy a place now, they are already established with a full family, not a couple alone looking for a starter home.
Also, cost is relative. The people next door paid more than twice for their home than what I paid for mine and the only difference in the houses is they have an extra half bath and a small deck out front. oh, and I bought mine 10 years ago. That is the biggest difference.

I’d downsize to a three bed with a nice kitchen.
You have two children, live in a four bedroom house with £20k savings and don’t want to downsize. If you can afford the increase (just) what would your plan be if interest rates went up again or one of you lost your job or became unwell? I ask this as someone who received a life changing health diagnosis at 45 that wasn’t covered by the critical illness insurance.

Ouch big jump £700 a month. We are in the same storm too our new payments are a little less got 2 teenagers used to think people exaggerated about being eaten out of house and home! .
Presume as you managed to save £20k over the last year since paying your debts you will hopefully have the disposable money to cover it. Hope you find some good savings somewhere childcare etc

We fixed at 1.68% for 5 years back in 2018. We need to do something about refixing in November. We’re looking at an additional £600pcm.

luckily house prices for three beds have increased to a stupid level so out kfc is favourable. (Mortgage is £340k with 25 years left. House values for us are around £850k)

but initially it’s still going to be a shocker.

Yes, these are the figures I came out with. Unless OP has a much shorter term.

The problem for the OP, and think it’s dawned on her, is if she has £300k outstanding (I don’t think it’s this much considering her age), then she’d have had a pretty big mortgage when she first bought, I’d speculate 10 years ago. Or she has increased the mortgage size on moving in the last decade.

Bottom line is: either OP has a £600-700k+ house, or she has a very short mortgage length remaining (less than 15 years).

Total bullshit that people used to start out in small flats and houses. My parents, all my friends parents and my PIL all started out in three bed semis. Many of them still live in the same house which means they haven’t paid a penny in stamp duty because they haven’t needed to move up the ladder. Meanwhile DH and I have paid over £70k in stamp duty moving up the ladder.

We’ve got 20k saved. We paid our other debts last year so savings were not really our main priority. Will need to see what difference paying off 20k will make

I wouldn't use the £20k to reduce your mortgage balance as it will likely only make a small difference to the monthly payment, eg you'd be looking at the difference in cost between a £350k mortgage vs a £330k mortgage, which will be maybe £100 pm.

What might be more helpful in your current circumstances would be to keep your savings (make sure it's earning as much interest as possible in an instant access account where you can make unlimited withdrawals) and use eg £500 pm towards your living costs over the next few years while you're at peak childcare costs.

Also, if you haven't reviewed your finances recently, have a look at Moneysaving Expert - if you can cut a few costs here and there, it can free up a bit of money to make things easier.

https://www.moneysavingexpert.com/family/money-help/

@Helpfulperson123 the user name is quite ironic, most unhelpful comment I’ve seen in a while 😂

This is the problem for people remortgaging and getting these hikes, they are tone deaf (with respect to those renting/FTB).

Are you saying you are gutted that your mortgage will be ~£2k on a £850k house? What’s your household income?

She did say last baby at 43 and at that age (I had my first at 40 and second at 42) you don’t really have the option to spread them out to reduce nursery fees

Well I’m 47 and have £460k outstanding (bought current house almost eight years ago) so I don’t think £300k outstanding on the mortgage is particularly high if she lives in the SE. You’d be lucky to get a nice three bed semi for £500k where I live and there are places that are far far more expensive than where I am.

Also, she may not have been in a position to buy until well into her 30’s, many people aren’t.

Sorry someone may have said this already but have you considered one of those mortgages where you're savings offset your interest on the mortgage?

The thing that makes me smile is that people seem no longer interested in working their way through a property ladder. They want their 'forever' home as their first home. This idiocy has been exacerbated by the unfeasibly low interest rates. Chickens are now, as expected, coming home to roost.

I'm out of sympathy for anyone who insisted their first home must be a 4-bed detached rather than a small flat/tiny house as was the norm previously.

This is not a sensible take.

The age of FTBs has risen, so people are more likely to have or know they're about to have DC. It's one thing buying that small flat as a footloose and fancy free twentysomething, quite another when you're doing it in your mid 30s and pregnant.

Then there's also the fact that moving costs. I don't just mean the usual solicitors fees etc, although that adds up, but also more and more people have to pay stamp duty now. Fiscal drag means the duty kicks in at a much lower amount in real terms than it did say 10 or 15 years ago.

And additionally, flats have been a rather mixed investment over the past few years thank to a combination of the cladding mess and the pandemic. People respond to that.

This idea of the ladder simply doesn't work in the same way it used to. FTBs haven't had the luxury of being as naive as you are about the issue.

Think you need to change your username

You're probably better 'self offsetting' ie get the best mortgage rate you can and a separate savings account again with the best rate you can find.

Offset mortgages have traditionally been uncompetitive, so while you might be earning slightly more on the savings, you're also paying more than you need on the part of the mortgage that you're paying interest on.

We’re in the exact same position, 1 year old just starting nursery, mortgage hiking up, joint income of 100k, not really able to afford much at all. It’s shit isn’t it.