Worried our mortgage will be unaffordable when fixed rate ends

[SorryNotSorry6]

..and I don’t know what we should do about it. We’re currently on a 3.9% fix which costs us £2140 per month so it’s already quite a big mortgage by a lot of people’s standards. But it is manageable for us. Our fix runs until August 2027 but I just did an online calculator thing and the best rate it offered us came to £2450 per month 😮 so an increase of £300. I’ve read that there will be up to 4 more increases in interest rates before then and realised that if rates go up to 6% then we will be looking at £2800 a month which we really can’t afford. I actually feel quite sick. We’ve got 34 years on the mortgage already so don’t think we can increase this to reduce payments. Sorry to sound stupid but what do people do in this situation?! The only answer is to move surely?

For reference we will still owe approx 480k in August next year which is just insane really isn’t it. We weren’t even right at the limit of the affordability calculator as our household income is on paper fairly good but our outgoings are just massive now (childcare, fuel, council tax is nearly £400 a month! Food for a family of 5)

I would recommend talking to a broker like London & Country, and just seeing if there are any deals out there. We’ve used them several times and always been pleased. They do all the leg work. And it doesn’t cost you anything / you don’t pay them - they get paid by whoever you end up using. Dont panic yet.

If a few hundred increase is such a worry then it’s clear you’ve massively over borrowed.

Downsize and lead a more stress free comfortable life. Stress due to buying something you can’t easily afford simply isn’t worth it.

That’s insane.
Sell up and move somewhere more affordable if you can

You can switch before the full time is up I think. Speak to a mortgage broker. Ours is up next October and we’ve started exploring options so we are as prepared as can be.

Massive hug for you OP 🫂
I think in that situation I would be looking to move to a more affordable property before getting to the point of needing to try to remortgage, but it's so hard to predict what will happen in a year.
Is it that you bought in a particularly desirable area? Or a particularly large house?
You might need to make some compromises but you've got just under a year, so plenty of time to think about it and make a decision.

Good luck!

You've got almost a year before your fixed term runs out, so it's great that you're looking at this now and have time to carefully consider your options. Is there any way to increase your income? Have you created a detailed budget to see where your money is currently going and if there is any way to reduce your outgoings? Will anything change in the next year, e.g. with child care?

I mean, you can’t turn back the clock, but surely you must have stress tested this before? You have time, so you need to increase your income beforehand,
or choose to move.

Speak to a mortgage adviser now and see what can be done. You might be able to remortgage earlier without penalties and fix at a more manageable rate. Maybe even start making overpayments now of £150 a month so it shaves some years off your mortgage and allows you to adjust to future increased.
My mortgage jumped from 0.9% to 5.9% and my payments doubled overnight! It was eye wateringly painful but I then managed to fix at 4.2% after a year once they came back down again. Fucking awful times, I feel your pain.

The problem with moving is really expensive with stamp duty, estate agent and legal fees, moving costs etc, If you think you might get pay increases in the near future it might be better to go to Interest only for a bit?

Have you built any equity up that might enable to you get into a lower interest rate bracket?

Get a good broker on sider and see he it is worth switching early, although that too can be costly with early settlement charges

This is the problem when people stretch themselves to the limit, there’s no wiggle room.
agree with others that 6 months before your mortgage finishes you need to go to a mortgage broker as they’ll find the best deals. We used London and country and they found a “good” deal for us.
see where you can shave your outgoings. Failing that there’s no other options, if you can’t afford your house you’ll need to move.

As others have said, use London and country as a broker and you can lock a deal 6 months before it’s due - we did that 4 years ago and got a 2.1% deal, when we got to renewal it would have been 4.4% so it was worth doing! We’re due next July so expecting a horrible increase, although on your high mortgage, £300 extra doesn’t sound that much. Ours is £1088 and if it only goes up £300 I’ll be delighted.

You can also add a few years on to make it more affordable.

Do London and Country have a Mumsnet marketing team?

If they already have a 34 year term few banks will go longer, they've already stretched themselves a lot. Doesny anyone stick to a 25 year term any more?

£300 isn’t a huge increase on a mortgage of this size, I’m surprised that you didn’t consider potential rate rises when taking out the mortgage. When I bought my house, my mortgage advisor explicitly told me what the monthly payments would be if the interest rates when up to 10%! It was a lot, but still doable in my income.

Lots of lenders let you remortgage 6 months in advance, so find out now what date you can remortgage and look at locking in a deal as soon as you can. If you can’t afford it then you will have no option but to sell.

You borrowed beyond your means basically.

You should realistically expect interest rates to hit their long term average at some point (7%) and act accordingly, and with a 25 year term.

It's making me feel sick OP, I understand. I live in a 1 bed flat, currently pretty much unsaleable and I don't know how you downsize from a 1 bed anyway. My mortgage hasn't really gone down since I took it out 10 years ago and I maxxed out the term last time, not a great idea when you're in on your own in your mid-50s. So it looks like it will increase again when my fixed term is up next year. The thing that keeps me going is that my mortgage is a third of what I would be paying if I was renting. It's really tough atm and I can't see it getting any better in the foreseeable future.

Honestly, even if you can afford the change when it comes up, you’ve massively overstretched if 300 is worrying you that much. It would probably be better to downsize and buy within your means, something that would allow you to cover and increase of 1/3 at least on your mortgage payments.

Stretching that hard is a young persons game, they can get pay rises and don’t have children etc, and if it goes wrong have less responsibility, it’s not a 3 child household game, too risky. Issues like this are the reason I didn’t move house when my husband and I doubled our wage, we could afford it, but why stretch at 40 when we are within 10 years of clearing it and at a nice low monthly amount.

You should definitely consider the downsize option to take the pressure off. But it’s a long time to next August so plenty of time to reassess and see if you can save elsewhere on things.

costs us £2140 per month so it’s already quite a big mortgage by a lot of people’s standards. But it is manageable for us

Obviously it isnt

Manageable would be having a big chunk of wages left after mortgage payments taken out so that you could meet the increases of COL and still swallow a 2% rise on mortgage

Mum took her mortgage in "78 at 8% and near on had the house repossessed in 1990 when rates hit 15% - near on doubled - along with all the cost of living increases , but they had just about enough wriggle room - no meals /nights out etc to ride it out . They could afford to heat and eat, they weren't destitute which so many became after having their homes repossessed

If the 2% hike on a mortgage is scaring you, then the 17% on heating should have you really worried, and then add on the increases ( which are getting bigger ) on food . Doesnt look like fuel is going down anytime soon

Start looking at your options now

And Im not being harsh. We are mortgage free, but are still considering selling up and downsizing because of energy prices. My electric provider has just increased my DD by £72 a month, and heating oil has gone from £470 a fill last year to a tad under a grand this year . On top of diesel for my car ( £20 used to last me 10 days last year - 4 days this year ) - its tough

At the moment we are still covering things, but have had to cut back in other areas , but we are both PT workers in our 60's so hard to increase income

Don't panic into drastic action of selling up when you've got a year left of your current deal. Also a lot of fixes already have rate rises priced in, so new fixes won't necessarily be as much higher as you've feared.

Also, if you've qualified for a mortgage that size, you should have the income to support it with some wriggle room, unless you’ve already used that up with extra childcare or other costs?

But you can help yourself now by strictly reviewing your budget to see if you can make it work with a higher mortgage and if you can, try and live as if your mortgage has gone up now, but save the extra and use that money to reduce your mortgage at renewal time. This might even get you down to a lower LTV bracket so you can qualify for a lower rate.

Be honest about wants and needs, it could be that you can continue to pay a higher mortgage if you spend more modestly in other areas and then as your DC reach school age, childcare costs will drop and you'll be able to relax your spending a little. Have a look at:

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

Have you got a spreadsheet set up already? We've got one and it changed everything for us.

Mortgage lenders who act responsibly are supposed to run affordability tests to check that your household finances are robust enough to withstand a rate hike of 3% or so. Therefore you should be comfortably putting an amount equal to 25%-50% of your monthly Mortgage Repayments into savings/home improvements/other entirely optional spending each month when you are on your initial fixed rate. So if you aren't confident you can make ends meet then yes you have overstretched. How old is the youngest child though? The difference in disposable income when childcare costs go down is quite dramatic and can really make the difference between struggling and suddenly being much more comfortable, if you can just hold it together and can structure things so as to not need expensive wrap-around care.

Are you in the smallest ltv %? Try overpaying if you are close to, to see if you could afford it and where to cut back. Also agree with others. You can usually.lock in a new rate 4-6 months before your current one expires and if they drop in the mean time, you can select another rate free.

Unless things have changed drastically in your home, I would feel angry with a mortgage provider who had let you sign up to such a huge mortgage with such a low margin for interest rate increases. If you have three kids, you can’t be that young - how on earth have you ended up with 34 years left on the mortgage?

It would feem really awful to have to downsize because of the cost of moving. BUT I would probably consider it - has your property increased in value since you purchased it? The rise in equity might effectively cover the stamp duty etc

I agree with others that it’s surprising such a small increase is leaving you so concerned. Also, 4 rate increases doesn’t necessarily mean a 1% increase in the available mortgage rates because the rates currently quoted are based on an expectation of what rates will do in the future.