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?

we are in the same situation. paying endless money to banks. and the more we pay to the banks the less we pay to cleaners, builders, winder cleaners, ect. We are only making the banks rich!

Wait.

Op hasn't mentioned their household income, which, based on a mortgage balance of nearly half a million quid, suggests a significant salary, even if op dropped a day. (£350 drop in wage after dropping a day makes her net now £17k so hubby is likely on ££££££ to service a mortgage so massive).

Something doesn't add up. This ain't about cutting back to yellow stickers at Aldi it's about the whole family's finances and something is going massively wrong somewhere.

But yeah, overstretching to buy a house when your income isn't big enough to maintain the mortgage and whatever else lifestyle you have isn't great

If you are able to work from home, are you able to work compressed hours?

If you could both manage 5 days in 4, you could cut childcare down to 3 days a week.

I do understand that, and obviously selling in a slow market is much harder. But if the alternative is eventually having a mortgage you genuinely can’t afford, I don’t think “the market is bad” can really be the end of the conversation.

There are still things people can do.
The first is price. Houses generally do sell if they’re priced at a level the current market will support. That might mean accepting less than you hoped for, which is horrible, but taking a £20k or £30k hit on a sale could still be far better financially than spending years trying to service a mortgage that is hundreds or even thousands of pounds a month more than you can comfortably afford.

And downsizing doesn’t necessarily mean finding the perfect smaller house and completing both transactions at exactly the same time. You could sell, break the chain, rent for a while and buy again when the market settles. You could move area. You could buy something that needs work. There are compromises between “stay exactly where you are” and “lose the house”.

If things became really tight, you could also speak to the lender early. Temporarily going interest-only could work which could buy time while you sell. I wouldn't go interest only long term as I agree that would be kicking the can down the road, but as a short term interim measure whilst you sort out your situation would help.

I think that’s the part I disagree with in some of these replies. People seem to be treating selling as impossible because the market is difficult, when actually it may just mean accepting a lower price or a less convenient move.

If I knew that at the end of my fix my mortgage could become genuinely unaffordable, I personally would much rather make those decisions while I was still in control — even if that meant taking a disappointing price — than wait until I was in arrears and had far fewer choices.

A bad housing market makes downsizing more difficult. It doesn’t necessarily make it impossible.

Very true

Yes, exactly. Those measures already exist to give people breathing space, but they do not make an unaffordable mortgage affordable. That is the point I was making.

Op remember you can secure a rate 6 months before the end of your current deal

But also remember these rises are predicted on the assumption that Labour are going to win an election (amongst other things) all it takes is for something else to happen for a swing in the numbers

Ive been where you are - ride it out - childcare fees and clubs are a killer - it does get better.

You both will eventually get pay rises etc it’s just going to be a tight few years

This is the price we pay when the government creates a system whereby our neighbours, get their children to nursery for free, they get multiple benefits, their rent paid, their council tax, they can even afford holidays abroad but to do that for those people it means people in a certain tax bracket are absolutely hammered!

I mean we think we have the money to buy a big house and on paper we do, however the reality is different, the bigger the mortgage the higher the repayments at even 1pc increases, the councils here can set their own council tax rates (since govt stopped giving them enough to fund the city) therefore the bigger the house the more council tax you pay, and the more it costs to heat!

No funded community schemes here for us, the neighbourhood next door that’s a different story though! And you can’t go to certain events there if you don’t live in that post code!

Rant over and good luck

We would have been in this predicament too. We sold the expensive dream home and moved to somewhere half the price and managed to get rid of the mortgage completely. We’d have now reached the point where we were just spending our savings which wouldn’t have taken long to burn through.

maybe time for a complete change - move area, go north, get a lot more for your money.

I have this same problem

i stress tested but then the car had to be replaced unexpectedly and then ex husband decided he didn’t want to work when he got the divorce payout and now no longer pays CMS - between those 2 things I’m worse off £800 per month overnight - no amount of stress testing could have predicted that

my fixed rate is up at a similar time - I have 2 plans.

option 1 will be to to switch to a part interest only if I can for a short period - 3 years perhaps (in 3 years time all childcare will be finished and a loan repayment will also finish)

option 2 is to extend beyond retirement age so age 72 - I’ll only do this on this next remortgage just to see me to 2030 when I should be a in a much better financial position

of course no one can predict the future though and this assumes I stay in my current job!

also with L&C I found them good but then ended up not using them - they said they’d notify me if deals changed and rates went down…they didn’t …and I found a cheaper deal myself

But they will have paid off some so could add a couple of years.

30 years seems the new norm but looks like op has over stretched in terms of years and amount and bought a house they can’t afford. Just because a bank will lend you an amount doesn’t mean it’s actually affordable with your lifestyle. We can borrow £550000 on our earnings but I just wouldn’t.

In 2010 in the housing market slump after the 2008 financial crisis, we sold for £20k less than asking.
We then bought for £13k less than asking.
If you can think long term instead of "my house is worth x amount and we will accept nothing less" then you'll probably sell.
Is planning for 8% interest rates not a thing, now?
I always bought with the view that if we couldn't afford the house at 8% then we couldn't afford it.
I agree with pp...op cannot afford this house.

God I couldn’t sleep at night if I had almost half a million pounds in debt. It sounds like you’ve really overstretched yourself with such a massive mortgage over such a long term. Hopefully your childcare costs will come down incrementally and might make things easier

Or you could get a loan for your childcare costs for the next two years

This is actually not a bad idea. Obviously it involves taking on more debt which is a risk but it would reduce outgoings in the immediacy. Depends how risk averse you are - many people spend their whole life robbing Peter to pay Paul and it works out okay

And even better if you can get an interest free loan from your parents or close family member

@SorryNotSorry6

I would actually be looking at / not ruling out interest only options for a fixed period.

BUT if I did it i would be taking the difference / excess and earmark it so it goes straight into ISA or regular savings... do not let the excess £ become lifestyle creep.

I know several wealthier families who essentially bought massive houses with interest only raised their kids there then sold up...

Money is just a form of energy.
You dont HAVE to own it or be mortgage free.

We have 600k mortgage and staring down the barrel of 5 or 6% is alarming so I feel you on this one... main thing is to actually make a few different plans and not bury your head in the sand.

Sell now.
Andy Burnham wants to take us back to the 70s which means high inflation, high mortgage rates and then I presume a housing crash.
I agree with other posters - think you have over extended.
I bought first house at 19 yrs old (late 80s) and watched as mortgage rates went from around 7% to 15% -our payments doubled. I can feel, the horror and uncertainty you have.
If you will not be able to afford a 7% interest rate and not expect one in 34 yrs your home is definitely unaffordable unless you expect a large inheritance or have large wage increase potential?
Remove the stress & worry and sell before you are forced to sell.

If you're going to do this and increase your debt, you need to accept it will impact your mortgage application if you do renew.

So you could create even more and bigger problems for yourself.

I personally wouldn't do this.

I overstretched on my mortgage. I became a single parent, wanted to keep the family home as to sell and move would have saved me very little in reality. My mortgage is cheaper than renting. I’m at max affordability but locked in for 5 years to see the kids through school with stability. But rising costs of everything else makes it a struggle.

I’ve had to change my way of thinking, electric throws and blankets instead of putting the heating on. Shopping, meal planning and batch cooking has cut my food budget a lot. Thinking ahead for days out and packing drinks, snacks, walking a bit further to get free parking. I changed all our phone plans to the cheapest and saved a fortune without anyone noticing. Shopping for clothes with more intention, selling on Vinted. It all sounds small but does add up, and actually there’s something gratifying in being more intentional with spending, no we don’t buy takeaway hot chocolate on a walk but we take a flask and homemade cake which feels nicer, and then when we do buy a drink we go to a nice cafe and make it more of an event.

I set up my accounts to show my spending, one for DD’s, one for food and petrol and one for fun. For childcare in holidays could you and husband cover between you? I know that’s miserable with no time together but for the short term it would be helpful and could cover 8 out of the 13 weeks of holidays minimum.

I thought they probably could afford it but then at some point had an additional DC and were hit with huge nursery fees.

Thank you for all the ideas I am reading through them and will start to do some planning. We don't have extravagant lifestyles by any means but we could be more careful with day to day spends. However we already don't do a lot of things that I see others doing, like I've already mentioned. We don't get takeaways at all and I can't remember the last time we ate out, my husband sometimes buys a coffee on the way to or from work so I can ask him to stop doing things like that. We don't pay for anything like a cleaner, window cleaner, we clean our own cars, I dye my own hair and even cut my kids hair (this is mainly due to one's SEN though in fairness, they are less anxious about it if I do it). However if I look through our statement I can see so many bits and bobs and I'm sure these could be cut down. This month I spent money on gifts for kids parties, some xmas gifts to put away for the kids (sale), various bits of uniform and school kit that needed replacing, household stuff like batteries, drain unblocker, all three DC needed new wellies, one is going on scouts camp so paid deposit for that. What I'm trying to say is that nothing I'm spending or buying seems particularly over the top or unnecessary, but I'm obviously going to have to be a lot more careful with this kind of spending. The food shop is another area where I could try to cut back more.

We are at 64% LTV so if we could push to under 60% then we may get a better deal. We haven't had the house revalued since the building work so it's possible that we could try going for a higher valuation but we won't know what they'll value it at until the lender does the survey. 750k is a conservative estimate, it's possible we could get to 800k on a good day but depends what the market is doing in 6 months I suppose.

I would be comfortable with the idea of moving to reduce this anxiety but to get 4 beds around here we are looking at minimum of 600-650k so once we'd paid fees, stamp duty etc it wouldn't knock a huge amount off the mortgage. So to make any great saving we'd be back at a 3 bed which would be very hard to swallow, not because I couldn't bear for the kids to share but rather because we were in a perfectly nice 3 bed before albeit on the smaller side. So this whole endeavour of moving, building work, etc would have just been one very expensive mistake. But that may end up being a necessary pill to swallow.

We could explore moving to a cheaper area but the kids are settled in school and because we are in the commuter belt you have to move a really long way for prices to drop significantly. Two of my kids have some SEN so change is not easy (and also relates to why I reduced my work hours). I also have other caring responsibilities locally which would make things tricky if we moved.

Not if the op sticks with the same lender - they don’t usually retest affordability

I after those similar questions, a few years ago as well was having very similar issue to the op everyone suggested them.

I have to say they were brilliant and have deals that no one else has. I promise i'm not part of any marketing team!

Btw op

for children’s parties I used to buy a pack of ten birthday cards plus generic gifts from b&m or Lego sets for under a tenner

Join Next and once you get a credit account you get access to their sale early - half price wellies, jackets, shoes and clothing and it’s £20 a year for all deliveries

You could also use Vinted or fb marketplace for specific items like Halloween costumes etc

That’s true if she stays with the same lender and simply does a product transfer, as existing borrowers can often switch deals without a fresh affordability assessment.

But taking out another loan still reduces her options. If her existing lender’s rates are poor or they only offer her certain products, and she wants to remortgage elsewhere, the new lender will normally assess affordability, including her existing financial commitments.

It could possibly be a lose-lose situation by making this move. A poor more expensive deal with her current lender that she is stuck with or unable to meet affordability assesments with new lenders.

So I still wouldn’t take on extra debt now when the whole concern is that the mortgage may already become unaffordable next year. It could leave her effectively stuck with her current lender at exactly the point when she most needs flexibility.