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?

do the sen kids qualify for benefits? once you get benefits you pay significantly less council tax as well as other things.

or would getting a nanny work out cheaper? there are threads about that on here. my friend had a cleaner and the way she justified the cost was that she had earning potential if £60 an hour and the cleaner was £20 an hour so it made sense for her to work the two hours a week extra herself (self employed so she could) and pay the cleaner. kept that cleaner in an extra week job for her family bills to pay too.

Not all holiday clubs are equal - school based ones tend to be more expensive because of how they’re set up. Here there was a very cheap (Christian) one last year and sports ones tend to be lower cost too I find.

They can afford the house – OP has said they can afford the increase, it just means not putting anything into savings. Welcome to 99% of the UK's position right now. No-one here even knows her outgoings and whereas she can save to both meet payments and put a little bit away each month. She's also in the childcare years, with two years before her youngest starts school – getting out from under that will relieve one of the biggest financial pressures adults face in affordability.

Moving house, to the tune of thousands of pounds, when the market is extremely downturned and when it won't even knock a significant amount of your mortgage costs anyway (because the OP can hardly up sticks to Northumberland, can she?), is a really dumb economic decision.

Riding out the short term highest cost years is sensible. Panicking at mortgage rates a year away isn't.

Are you receiving DLA for your 2 children with SEN? It’s worth looking into if not. Also, look at local Facebook gifting sites for wellies, Halloween costumes etc. And are there any council run holiday clubs as these tend to be cheaper.

it does get easier as the kids get older, I don’t need to pay childcare now and I honestly don’t think I’d manage if I did. Try to ride the wave if you can, save as much as possible now so you can figure out if any mortgage rise is doable and hopefully you’ll then have enough to push you down into the lower LTV bracket too so double win.

If you can afford more now I would start overpaying every month, even a few hundred every month would help over the next year.

Contact some brokers, find out how much it is to get out your fix and how much it will increase to. You might be better waiting and finding one you can lock in a rate at 6 months in advance. That can protect you from further increases and you transfer to the new mortgage when yours ends.

They are the cheapest ones around here that provide an actual whole day of childcare - there is one church one but it only runs for one week of the 6 weeks holidays. It's £5 a day instead of £40 but it's something like 10-2.30 which isn't enough. The other options locally are sports based activities which are more expensive and also often not 9-5, or even more expensive (there's one at a school with a swimming pool which DD would love but its £57 per day!). We do try to limit use of clubs but because of the nature of our jobs we can't always be that flexible with annual leave. For example we both have xmas closure which is lovely and means we are off together as a family for two weeks (and don't need to use holiday clubs then) but that is mandatory holiday so we don't have a huge amount left to use the rest of the year.

I don’t understand. You must be on a decent salary to have a nearly £500k mortgage and not have maxed out your borrowing. What salary are you? When did you move to this new house? Interest rates have been going up for years now and this should have been stress tested when you took out your mortgage. There’s only 2 real solutions for this given your age and mortgage term and that’s to either earn more or sell up and downsize. This is going to be the reality for a lot of people who have over stretched themselves and taken out massive mortgages!

Do you both earn under 100k? I assume so because you say you get free childcare but that’s a huge mortgage for a salary under 200k combined. You must have had a big deposit. It probably was okay but with the interest rate increase on top of living costs (fuel/bills/food) increase it’s going to be a struggle. How many cars do you have? Any on finance that you could return?

I haven't applied for DLA because I'm not sure we'd get it. They have the kind of SEN that means there is a constant underlying day-to-day struggle but not so much that they get any kind of support at school. I suppose there's no harm in applying though.

I think we have a different definition of “afford”.

If paying the mortgage means there is nothing left to save and no meaningful buffer for repairs, car costs, bills going up or any other unexpected expense, then yes, technically the payment can be made, but the household is financially very exposed.

And the childcare argument only works if everything goes perfectly for the next two years. Given what's on the horizon this is not a safe assumption. Childcare reducing later doesn’t help much if the finances are already stretched before then.

Nobody is suggesting she panic and put the house on the market tomorrow. The sensible thing is to look now at what the higher mortgage is likely to cost, what genuinely disappears when childcare ends, what buffer remains, and whether keeping the house still makes financial sense.

Planning a move before you are forced into one is not panic. Waiting until you have no savings, no flexibility and fewer options is what I would consider the bigger risk.

Our mortgage interest rate went up to 12% in the 90s, we struggled to keep the house, it was dire. There were so many repossessions, hopefully it wont get that bad ever again but it made us wary when borrowing

We'll also have to disagree on what 'panic' means then, because selling your house is definitely a nuclear option in my book.

There's also not much use in debating 'affordability', when you (nor I) even know her actual outgoings are. OP isn't even working full time and if she uses traditional childcare, as most do, she'll be paying something between £500-1000 a month, plus losing £350 a month by working part time. That's where her flexibility is.

There’s no harm in applying for DLA - they’ll just say no if you’re not entitled to it.
I would consider interest only on the mortgage until the kids are at school. This will help you to make the nursery payments. After that, you may be able to overpay to make up the payments plus a few years down the line your wages will rise.

Definitely worth trying OP. My son doesn’t have any issues in school because he’s medicated and likes to bottle it up for us. Sometimes you lose sight of normal with a SEN child, all those those little things you do at home to help keep them regulated add up. I applied thinking we’d MAYBE get lower rate, and was very shocked to get middle rate with lower rate mobility. They can only say no.

I don’t think selling and downsizing is automatically a “nuclear option”. Sometimes it is just a sensible financial reset.

And you’ve actually made my point about affordability. We don’t know her exact outgoings, so we also don’t know that increasing her hours or reducing childcare will neatly solve the problem. Those are assumptions about the future, just as mortgage rates a year from now are.

If keeping the house only works because she must earn more, childcare must fall, nothing unexpected must happen and there is no room left to save, then I would still call that financially stretched.

Looking at whether a cheaper house would give the family more breathing room is not panic. It is simply considering all the options before the mortgage becomes a problem rather than after.

Her children growing out of needing childcare for multiple full days a week is not an assumption – it's an inevitability. Since the OP says they wanted more room for her youngest, and her youngest isn't in school, it means that they have moved within the last 4 years. Eradicating all that she has spent on the moving fees, solicitor fees and stamp duty and building works for her current house, after only four years, and sinking that into another house move, that won't even move the needle that much, is a poor financial decision. Tighten belts, keep all the equity you have built and ride out the highest cost years.

I think that is actually a classic sunk cost argument.

The stamp duty, solicitors’ fees and money already spent on the house are gone. Staying for longer does not somehow recover them, and the market is under no obligation to repay those costs through future house price growth.

That is especially important in a weak and uncertain market. If prices stagnate or fall, they could sit there for years paying a much higher mortgage and still not get back what they have already spent on moving and improvements.

Selling also does not mean “throwing away the equity”. Apart from the costs of moving, the equity goes with them and can be used to reduce the size of the next mortgage.

And I still don’t think “tighten your belts and ride it out” is automatically the low risk option. If riding it out means no savings, no emergency buffer and relying on childcare falling, wages rising and mortgage rates improving at just the right time, that is a gamble too.

The sensible question is not “how much have we already spent on this house?” It is “from today onwards, which option leaves us in the strongest financial position?”

Sometimes the answer will be to stay. Sometimes it will be to downsize. But keeping an expensive house purely because you have already sunk a lot of money into it is exactly how people get trapped by sunk cost thinking.

The standard of property has no bearing on the affordability of the mortgage though. Either it was too stretched or it wasn’t. The thing that would need to change is the area, move slightly further from London, get a cheaper property as a result.

The stamp duty, solicitors’ fees and money already spent on the house are gone. Staying for longer does not somehow recover them.

But not moving again (when you otherwise wouldn't have) means not incurring those costs (SDLT mainly) again

Yes, of course moving again creates another set of costs. But that doesn’t automatically mean staying is cheaper.

If staying means servicing a much larger mortgage for years, potentially with very little financial buffer, those extra interest costs can easily dwarf the SDLT and legal fees of moving.

That’s why I think the right comparison is not “we’ve already paid to move once, so we must stay”. It’s “what will each option cost us from this point onwards?”

Sometimes paying a one off cost to reduce a very large ongoing liability is the cheaper decision overall.

This has nothing to do with 'sunk cost fallacy' – that's a huge oversimplification, especially when we are talking about a mortgage term over 30 years, versus what is, very realistically, the next 2-5yrs of OPs life. This is not sunk costs, this is future costs and future benefits – especially when OP can't actually move to a house that opens up future financial benefits, considering that what she spends in doing that would eat up a meaningful chunk of what she is trying to release. That isn't a financial strategy.

The childcare and young-children portion of their lives is a huge part of the equation. Current cash flow is not representative of their long-term position. It is shortsighted to make long-term definite financial losses over short-term cashflow shortages, especially when market unpredictability is this high.

True - but what you've described here isn't the sunk cost fallacy.

This is the exact dilemma we have about moving. On the one hand, staying could be the better option - things get easier in the next few years financially, we have wage increases, interest rates settle. In the future we may be very glad of the additional space particularly for DC with SEN who may be living with us for many many years to come if they struggle to be able to live independently as adults. Over the next 15-20-25 years £2500+ per month won't feel so bad with inflation, compared to our wages.

However I also think through a lot of opposite scenarios that really make me anxious. We know more than one family whose DC with SEN have stopped coping with school, had real MH troubles and become unable/unsafe to attend but they aren't eligible for any specialist provision and so they end up home education and having to take a huge pay cut to enable this. Another potential factor is that DH and I both work in the same industry, and if the bottom falls out of it due to change of government and/or rise in AI then we could get made redundant and struggle to find similar jobs. Obviously it's possible that interest rates could go way way up again. Then there's all the uncertainty about global energy and food prices, we may end up paying the kinds of prices for food that my brother is in Australia at the moment. I think all of these things is why I have had this sudden panic, in my head we were on a fixed rate and the current cost was affordable, we could put a little bit away each month for emergencies, it's ok. But I've realised that because of the huge loan amount we are really vulnerable to interest rate rises and if the SHTF in any other way then we could very quickly be in trouble.

I think the flaw in your argument is that you are treating “staying put” as the neutral option. It isn’t.

Keeping a very large mortgage through a period of tight cash flow is an active financial decision with its own risks. You are choosing continued exposure to interest rates, house prices and household income at a time when the job market is far from guaranteed.

And the sunk cost point is not “too simplistic”. Nobody is saying past costs are the whole calculation. The point is that previous expenditure should not be allowed to distort the decision from here. What matters now is the future cost and risk of staying versus the future cost and risk of moving.

That includes the enormous amount of interest that can be paid over 30 years on a large mortgage. Reducing the capital owed can have a very significant long term benefit, even after allowing for the costs of moving.

So the sophisticated financial strategy is not simply “stay because moving is expensive” or “ride it out because things might improve”.

It is to strip out the emotion and the money already spent, model both paths properly, account for interest, income risk, market risk and flexibility, and choose the option that leaves the household financially strongest.

That is not simplistic. It is exactly how a proper forward looking financial decision should be made to build family wealth.

It absolutely is the neutral option when OP is still in a relatively very shirt term period of high outgoings.