Mortgage rates

[Gothamcity]

I know no one can predict what is going to happen with mortgage rates, but just wondered if anyone "in the know" could give any sort of insight if things are likely to dramatically change anytime soon. We're due to remortgage early next year, and with the current situation with the rates, our monthly repayments are going to increase significantly... To a level we can "afford" but things will be tight. Worried that by the time we can lock in a deal things may be even worse and we will end up not being able to afford our current house. We don't live a lavish life, have had a mortgage for almost 20 years, and earn substantially more now than we ever have, but our wages haven't increased in line with inflation, so although our salaries are good, we're extremely worried. Our mortgage is actually really small in comparison to others, as we saved hard and bought young, and have always lived within our means, and had a comfortable life. We've looked at potentially downsizing, which we may have to do, just seems crap, when we don't have a huge house or mortgage, have never stretched ourselves to buy the biggest and the best, and actually moved here for cheaper housing. I absolutely love our little house, our neighbours, our street, it's just perfect, we're close enough to both children's schools that they can walk each day and my office is just up the road. I've looked around and there's nothing for sale around where we are that would warrant moving to make life cheaper, by the time we factor in stamp duty and moving costs. Our house is on the cheaper end of houses around here, so I know we aren't going to find anything cheap enough, moving would mean moving out of the village. Just feeling really sad and deflated. We're both professionals with good jobs, working hard, but don't get a penny of financial help as we're in that middle band of people that always seem to get screwed over. I'm not looking for sympathy, just words of advice.

Just to add, I've spoken to the bank, and they won't let us lock in a rate before January. With the rates are they are today, we could afford to stay here, just about. It's crazy increases I'm worried about and wondering if we're best off putting the house on the market now

I think the signs are that interest rates will rise in small increments. Can you extend the term to keep the payments lower temporarily then start overpaying when you get pay rises? If you have a good pension, some lenders will let you extend to age 70 (but you can pay it off earlier).

Some banks allow you to get a deal 6 months before others 3 months.

No insights into what is going to happen but I would be looking what other mortgage offers are out there to fix now for when your deal ends, it might be worth consulting a mortgage advisor. If you ideally want to stick with your lender I'd do this anyway but look for other companies without fees if you decline the offer before you take it out as a bit of security in case the rates do start to increase.

Have you got a recent valuation or idea of what it is valued at, to optimise the LTV? If you are close to an LTV boundary would you be able to overpay to get under it for better rates for example if you are at 76% getting it under 75%. It can be a bit of a cliff edge. When we bought our first house we ended up reducing our mortgage by £1000 as it tipped us into a different bracket and we got a better rate.

Would there be any option of extending the term? If it's a close run of affordability could you extend the term by 5 years to bring down the payments - this would make it more expensive in the long term so I would do this with a mortgage you could over pay and would pay the difference into a separate account as an affordability buffer and overpay periodically from that account to mitigate the risk. It would mean that whilst most months you would be paying as if it was the regular term but if you have extra expenses one month you have the flexibility.

This is all great advice.
Look around at different lenders, or try a broker. Get the best deal you can locked in now. Don't be loyal to your bank and get screwed over

Martin Lewis had Chief UK Economist at Barclays on his podcast a few weeks ago, which was about interest rates.

I think the views were that there will definitely be a 0.25% increase in November. There was some disagreement whether it would continue to go up. Markets believe it would go up another 0.25% early 2027, and then another 0.25% quarter until the end of the year.

It's still on BBC sounds if you wanted to take a listen, the whole episode was about interest rates and how it could impact mortgages etc - just checked it was 24th September.

Putting a house you don’t want to sell up for sale now with no correct market info is silly.

stay in the house you love

you can look at extending the term to reduce the monthly payment.

OR

if it comes to it you our your partner taking a second job

can you reduce household outgoings to help towards mortgage payments?

The discussion on Times radio this morning said they thought Bank of England would put interest rates up to 4%.

This would raise mortgage rates - likely to 5% and they thought that this was likely to be long term rather than short term.

I'm not really sure what you can do - you've had the mortgage 20 years, say it is small and that things will be 'tight'.

I think it's going to be tight for a while, so it's a matter of cut whatever you can from your budget and hold on.

If you have 20 years of equity in the house and are young enough to have dc still in school can you not remortgage with an extended term?

Rates for fixed rate mortgages follow swap rates far more than Bank of England rates.

Swap rates reflect what it costs a lender to fix money over 2 or 5 years and are based on gilts i.e. government bonds. If the interest rate the government has to pay to borrow money - gilt yields - rise due to inflation or worries about government borrowing, swap rates and fixed mortgage rates go up, even if the BoE rate is unchanged.

With inflation and government borrowing high, swap rates are also high. That's why fixed mortgage rates are currently in a range from just under to well over 5%. Will either of these have changed substantially by January? The OBR is forecasting that inflation will average 3.5% in 2027.

I thought swap rates are based on the various factors you've outlined, including gdp growth, defecit, inflation, etc...but isn't that linked to base rate - as in markets expectations of where the base rate is expected to go?

How many years left on your mortgage?

Can you find an ok 5 or 10 year fix that would see you to the end of it (or a good chunk of it).

Agree with pp to look now at other lenders as approve mortgage offers last up to 6 months, so you don't need to wait until January to start the process.

Thanks for the comments and advice. It's really tricky to know what to do for the best. We have around £100k left to pay off, house is worth about £350k. I've been looking at houses in the area for around £280k, as thinking even with stamp duty and moving costs, we'd have less than half of what we have to pay off then. We can't extend the term, it's already as long as they will allow. Just cannot believe it now feels "unaffordable" to live in an extremely modest house, in a relatively cheap area, with two full time salaries. I'm guessing lots of people will be in the same position as us. I'm going to speak to the estate agents next week, and talk about putting it on the market. We "could" get second jobs, live extremely frugally, and put all our earnings into staying in this house, but I don't think it's worth it. I would rather not be worrying each month about money, and live in a smaller house in a less desirable place.

How long do you have left on the term? If it's as little as 10 years say, the repayments on 100k at 5.5% would be 1085 a month. The money saving expert website has a great budget planner which could come in handy and you might find that things aren't as scary as they seem?

Some lenders might let you fix 6 months ahead - and you say you can’t extend the term further but is this with any lender or just your current one? A whole of market broker might be able to help you check the above two points.

Is I an option to lend the money from family?

How short are you in your budget? I would wait in your situation until at least you know what you are dealing with. You can always move next year if you find it is too expensive.

2 full time salaries isnt far off 40k, 100k mortgage should be affordable? That would be at min wage, can either of you seek better paid work or train in something better paid?

I’d definitely speak to a mortgage broker OP to make sure you get the best deal before you make any kind of decision. We very fortunately fixed at 1.5% almost 5 years ago, and at the time that was better than any deals I found myself. Our mortgage advisor is about to start looking at new deals for us, our fix is due to end in March.

Can you ask around friends and colleagues if they have a mortgage broker/advisor that they use? We don’t pay ours anything, he gets his commission from the lenders. He also does our mortgage insurance at the same time.

Yes before you think of selling up go to a good mortgage broker who will search whole of market. Some lenders will allow you to extend a few years. If you let be your house and neighbours I think you'd be mad to sell which will cost in solicitors fees, SDLT as well as remote val costs in general eg curtains won't fit new house etc.

In kindness, you sound very anxious about a £100k mortgage for a couple earning middle wages with no debts and what you describe yourselves as a fairly normal lifestyle.

How old are you that extending the term further isn't possible - you can remortgage up to at least 68 as this is most middle aged people's retirement age now. With school age kids I'm imagining you are mid 50s max?

As a pp said above a £1k pm mortgage or rent is pretty average for a family home so unless your future earning is limited by a health condition or something I definitely wouldn't downsize with all the costs that involves for the sake of a couple of hundred more in your pocket each month unless you are really struggling financially