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?

You think op can’t find a house for 650K?
Sure, they might not have as many rooms as they’d like but that’s how it goes.

Or just downsize - both the house and stress levels!

Well I suppose it depends on what they currently have. OP said that in one year the mortgage will still be just shy of £500k. Finding a property for £400k could well be doable depending on where they are and what they need - which is why I asked the questions.

Come on op don’t sell your house - even if the rates shoot up at the time you have to re-new then just go on a variable rate without penalty and then as soon as they drop again you tie in

Lots of people panicked with the Liz truss crash and ended up on 6-6.99% rates and tied in too.

All will be fine - you just need to tighten your belt and ride it out - everyone else is doing that - especially in circs like yours with the CC fees

And still op fails to admit what their joint salary is...

For a half million quid mortgage, they're on a good £100k. An extra £300 a month is a drop in the ocean.

I'm not 'failing to admit' it, like it's some sordid secret. Are you hoping for an 'aha!' moment where you catch me out and it turns out I'm a secret millionaire?

We were on a household salary of about £100k, yes, but then I reduced my hours so we're not anymore. I already said that we're earning more than average, in professional jobs. We both pay into pensions. So does it really matter what the actual salary is? Neither of us are 'high earners'.

I've done the zero based budget, added up all our bills, insurance, childcare, costs of food shop, kids clothes and uniform and shoes, sinking funds to pay for annual expenses like car insurance and service, one annual camping holiday, etc etc... and currently we have a bit leftover to put in savings so that we can pay for a new boiler or a new car or to fix the roof. Isn't that what I'm supposed to do? What I'm saying is that if the mortgage goes up to nearly £3k a month, that will mean there's nothing left at all for savings and we will also have to make some cut backs. If you are only just breaking even each month then in my mind you can't really afford the house because at some point the boiler will break, the washing machine needs replacing, and how is stuff like that going to be paid for? Houses cost money to repair and maintain, same with cars.

I've avoided making it about salary because then it turns into 'on £xxx per year you shouldn't be struggling! You must be burning money!' etc etc because people latch onto the salary amount and don't think about how much of it actually goes on tax, NI, pension, student loans (yep still repaying those thanks to postgrad degrees). And really it's about having a big mortgage that is going to get even bigger, and about the worry of having that hanging over you. I'm not talking about being in poverty and I've made that really clear.

Talk to a broker now and consider extending the term for example if you have 25 years left extend that back up to 30. It doesn’t mean it’s gonna take you 30 years to pay off as you can over pay when you can but does bring the costs down a little A broker can look at this for you. We are about to renew from a 0.99% fixed rate to 4.68 but just had the variable rate through as 7.2! Rates haven’t come down since we spoke to ours so sticking with our initial quotes

You need to either move to a cheaper property and except that your children will share a bedroom or you take the dining room as your bedroom and have the 3 kids upstairs which is what friends of mine have done to accommodate their family. You cant have both ways, you are currently living beyond your means and it will only get worse once the fixed term ends. Stop holidays, I know you said it was ‘only’ camping but still that costs money that you don’t have. The odd day trip to the beach will be fine for your small children at the moment.

We’re in the same boat, I was saying to my dad the other day, on 100k a year, twenty years ago you would be expecting to have two long haul holidays a year plus one week skiing, drive a fancy car and shop exclusively in Waitrose. The reality is a household income of 100k isn’t a high income in that sense anymore. T used to be that if you’re on 100k then you will feel well off, with inflation you are living a 50k lifestyle, which is pretty average Joe.

I think it’s more increased housing costs rather than inflation that have got high earning couples with kids into a bind.

Fine if you rent, not so much if you own. If something breaks you need to find the money to fix it!

What savings do you have now?
Do you actually have ££££?
Childcare years means no savings but you can do 0% credit cards for bills like car.
In few years childcare costs will be less.
See if you can extend mortgage to 40 years term when you remortgage then review in 5 years
You have a nice house with a few hundred k of equity so you are in a strong position!

We should expect interest rates to be average with house prices vs salaries completely distorted?

Also people are stress tested now but utilities, fuel, food etc have all increased considerably

I’m a single mum on £30k and own a house. I could only dream of £100k! Only on Mumsnet is £100k seen as poverty.

Maybe they will bring back MIRAS?

currently we have a bit leftover to put in savings so that we can pay for a new boiler or a new car or to fix the roof.
So you have savings now and can use those savings if needed for day to day and use credit card 0% if something later comes up.
Just ride it out
And if it really goes bad then you still have the option as a back up to sell up and move to a smaller property. Because you have some 100s of k in equity

I agree with this - I don’t know I suppose it’s your life experience but my parents had some really tough times affording our family house over the years and each time they rode it out, robbed Peter to pay Paul and hoped things would get better. They always did and they sold it for a £600k profit.

I agree with this

When did you buy your home?

This year but not London.

You have my sympathy OP. Interest rates are higher than the Trust spike as we were coming out of COVID. You will not be alone.

Selling and moving doesn’t sound like a good plan to me. You would lose 10s of thousands of pounds in moving costs, for nothing. Your lives as a family would be very disrupted.

Talking to a mortgage broker is a good idea. Going interest only for a while is not the end of the world. It would be cheaper than renting and save you moving costs. Yes, you would not be paying off the house, but you still have your current equity. If you never pay off the mortgage completely, you will still be able to sell the house when it suits you and unlock whatever equity you have. As your children get older domestically of the costs will ease and things will get easier.

I would recommend voting for politicians who will reign in spending. It’s our best long term hope.

The thing to remember about interest only is the op can still overpay some of the capital if she can afford it so it’s not a total loss

It’s no loss at all. Just failing to get ahead for a while. Selling would create a loss.

Don’t be facetious, nobody is saying that 100k is poverty. But if you would like to list your outgoings and income then we can see how you’re able to manage on 30k and we can understand why the same level of income may not achieve the same standard of living for me.