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?

Is inflation even working?

I am so lucky we fixed until 2025 so time to breath and save hopefully for any potential hike after the fix. But we are already pretty much to the bone and have been for a while. The only things I have left to cut is food, clothes, haircuts. We only go out for max £20 lunch or coffee. Buy minimal clothes. Not cut my hair since October. Kids hair was Easter. No new school shoes etc. Inflation rising just means we get into a mindset of only having the car and one holiday a year as a luxury while the house falls apart around us. When / if inflation slows down I will spend what I should have on the house.

Bottom line is that I can't see myself spending on luxuries again for years into the future. So when we are needed to start spending, like covid, you've learnt how not to. So I don't understand inflation and not convinced it works.

I've got young kids and was previously happy the freezer was full. Now I'm happy it's empty as I know I'm making maximum use out of every item of food. How do you shift back from that?

I could not afford to buy my own house on my salary in todays money.

same

That says more about salaries over the las 30 years than it does about house prices

One reason for wage stagnation has been low interest rates

@PinkCherryBlossoms as you say it's so odd!

Acknowledging it's harder now doesn't mean it wasn't hard then. And the conversations always ignore MIRAS & wage stagnation.

It's not just salaries vs house prices. It's salaries vs house prices vs mortgage rates. What matters if you're buying with a mortgage isn't the cash upfront, price it's how much it will cost you per month.

The unprecedented run of super-cheap money is what's made crazy high headline house prices affordable to people buying with a mortgage. Because the rates have spiked so quickly everything's now out of whack.

Can I be the first and only person to say, thank god for the banks' affordability stress tests. If it wasn't for those tests they'd applied in the past few years, people like the OP would be forced to sell in a blind panic or risk repossession, rather than "just" thinking "oh shit the next year's going to be very tough - we'll have to cut back/extend our term for a few years/dip into savings".

The average house cost 3 times the average salary back in the 1970’s it’s now at about 8 to 9 times the average salary.

Housing shortage is linked to population growth but more so the change in societal patterns. In 1970 10% of homes had 1 occupier these days it is around 33%. It’s a mixture of older people living longer and a change in attitudes, people do not have to couple up or remain in a couple anymore. This is rarely touched on people focus purely on the ageing population and not that huge societal shift.

No one wants to go back to marriages till death releases an unhappy spouse. But amongst my own friends, all late forties to mid fifties now we have hit that hump of people leaving when the kids are older I have two friends currently getting divorced. I live in a row of 8 identical houses, big three bed homes with large gardens and a drive, family homes perfect for a couple and 2 children. Currently 2 are occupied by a single person and for 10 years 4 had a single occupant.

I hope people are aware that mortgage rates are now normalising. They're not going to go down very much. I came across some old mortgage statements from c.2005 and the mortgage rate was 5%. That was considered normal.

I think house prices are going to drift down and wages will drift up until affordability is roughly achieved. Don't know how long that will take and there will be bumps in the road.

Have read all the OPs post but not the whole thread....not all of the UK gets free 30hrs....maybe she lives there.

@Amboseli there is no such thing as "normal", a 6% interest rate today is equivalent to 13% in the 80s due to house prices. I'm not saying we will go down to the ultra low rates, we shouldn't want to, that means our economy is underperforming, but you can't look at interest rates and previous decades in isolation to assume a "normal". The interest rates we are seeing now aren't sustainable in the current economy, the economy and landscape we have today is very different from 15 years ago. Yes house prices likely will adjust, our interest rates likely will too.

All that matters with any borrowing is how much interest you ended up paying over the lifetime of the loan. If you want to compare between generations, then convert the interest into a % of the initial loan value.

FTBs today taking out 40 year mortgage terms will pay an extraordinary amount of interest on their initial loan. When interest rates rise, terms should decrease, but because that would cause an immediate correction in the housing market, the solution has been to kick it down the road for several decades, and allow longer and longer terms.

My original post (now deleted) was stating that if you’ve had years of low interest rates you were able to pay minimal amounts of interest, and presumably had a normal term, meaning you are far better off than the generations younger than yourself, who are likely to never see those low rates.

Of course, it’s shit for the OP et al. They have been lured/forced into taking out large mortgages on low rates and now bam, have been hit by hikes. But there has to be more compassion for those who affected worse, and I just don’t get that from the OP.

She hasn’t come back to the thread, mainly because if she gave more details I think the sympathy would dry up fairly rapidly.

Could you extend the term for a couple of years, then when the nursery fees tail off imma couple of years, remortgage and bring the term down?

sending hugs xx

Because parents who work are helping keep the economy moving. As you say paying tax and NIC. Parents who stay home not so much.

And food prices? And energy prices? Clothing? I think those all accounted for a far higher proportion of household income in the 1980s. One of the reasons people are able to spend more on housing now is that the cost of many the other necessities has, in relation to income, dropped.

You may feel it was easier than now but that's not how I remember it. I remember moving into the box room (basically a walk in wardrobe off the living room) and taking in 2 lodgers to make mortgage payments.

I won't suggest that the OP considers a lodger because I've suggested that to people before and understand it's no longer considered a reasonable adjustment but that's what I would do in her place.

Agree, all those saying that low interest rates are a joke should also remember how little housing there is available to rent, and the rental prices are staggeringly high in many areas. If homeowners can no longer afford their properties, we will see greater homelessness than we currently do and our local authorities will be overwhelmed with applications for social housing.

We need to look after the working population far more with regards to homeownership. It’s all very well for those people with no mortgages to be smug, but you’ll soon be complaining when your area is full of empty houses, property values go down, crime increases, schools are downgraded and there’s little to no investment in your area. It’s worrying times for many and I have huge empathy for those already being hit by higher interest rates.

@peasblue you're right. There will need to be a 3 way adjustment. House prices, wages and interest rates.

Out of all 3, it's wages that need to go up. They have stagnated for 15 years. And the increase needs to be paid for by corporations accepting lower profits. But can't see that happening.

Mortgage interest rates will come down but very unlikely to be below 3%.

We're going through a horrible transition adjustment period and as always some people will be unfairly hit much harder than others.

The incompetence of the government and BoE is to blame.

@DisquietintheRanks millennials & gen X have less disposable income than older cohorts had at the same age?

I absolutely do not mean to make light of the misery felt by those currently affected but house prices do need to come down. My house price has doubled in 10 years - that's not good, that's insane. It would be better if they came down due to a mass housebuilding programme and increases in social housing than due to mass repossession but things can't carry on like this.

Out of all 3, it's wages that need to go up. They have stagnated for 15 years. And the increase needs to be paid for by corporations accepting lower profits. But can't see that happening.

This is the conundrum, wages need to increase significantly but private companies won't do it without passing the cost on & public sector means more tax hikes. Businesses & the government haven't invested in their people, infrastructure, education etc which is one reason why productivity is stagnate.

FTBs today taking out 40 year mortgage terms will pay an extraordinary amount of interest on their initial loan. When interest rates rise, terms should decrease, but because that would cause an immediate correction in the housing market, the solution has been to kick it down the road for several decades, and allow longer and longer terms.

We never recovered from 08 & then Brexit & covid came along. the house price issue was kicked down the road & there's not much road left.
Now we have huge intergenerational inequality with some people having houses worth 1000% more than they paid & younger people servicing huge amounts of income in housing costs. Plus many older people have more than 1 home whereas younger people are stuck renting with a severe lack of council housing. And the small issue of ageing population with a shrinking pool of workers.
Of course some will benefit in terms of inheritance but that's going to just make this more unequal.
I don't know how it can be fixed.

I wouldn't use your savings if I were you. You might get an unexpected house repair bill. I wouldn't extend the term either if you can avoid it. It's usually a very tiny monthly saving for a shit load of extra interest.

I get that it's horrible having a huge hike in payments, but in the grand scheme of things, 2k between two full time workers isn't a lot. It's only 1k each. Many single people will be paying this much, plus all bills etc.

Your eldest should be out of nursery in a couple of years, pay will increase, it will get better.

£5,000 in 1982 is equivalent in purchasing power to about £22,577.27 today

https://www.in2013dollars.com/uk/inflation/1982?amount=5000

🙄🙄🙄

Don't be so ridiculous

Back then the average age of a first time buyer was about 21. Now it's 35. You can't expect a family to live in a tiny 1 bed flat.

Could you get a lodger? That's what we've done to cover some of our nursery fees. With 4 beds do you have a spare room?

Useful calculator my salary in 1976 £1300 pa. OH £1000 PA. We bought our first house for 13k with a 7k deposit. The interest rates went up and up. Finally peaking at 16%. We ate a lot of baked beans, fish OH caught. There was no credit system, no gov help at all apart from the family allowance. I'd go round the supermarket with a calculator Kwiksave then totalling up what I'd spent. OH had a work car which was a blessing even if I could use it.

The good thing about this crash was it cooled an overheated housing market. In three years house prices had nearly doubled by the time we bought.

We did have plenty of council housing property stock back then. Which saved many families from homelessness. Nowadays the picture here is bleak and nibbles around the edges social housing wise

We had a lodger in the 70's in the box room (was my bedroom) and I shared with my sister. Did that for about 4 years so my parents could keep the house.

Nowadays I hear people say that a box room isn't big enough for a child 🤨

I'm thinking the only option to keep costs similar to today may be to just go with an interest only for a couple of years at least then if the job market goes T-up, benefits would cover the mortgage ie no risk of losing the house.

A word of warning: benefits for mortgage interest are in the form of a loan, secured against the property. Only the first £100k of the mortgage is eligible for support, and the interest rate used to calculate how much you'll get is only 2.something %. If you're paying 5%, there'll still be a shortfall.

The interest rate charged on how much the govt lends you is over 3%, and is added to the debt. It's still a lot lower than you'd currently pay, but you'd need to do your sums to work out if it's worth it.

You are only eligible if you've been getting UC (or pension credit) for 3 months, 9 months for other means-tested benefits.

I rarely come across it, as most of my clients are renting, but in the two cases where I looked into it, the clients decided it wasn't worthwhile and downsized or moved to a cheaper area.