What mortgage interest rate would be a problem for you?

[Rollercoaster1920]

All this talk of mortgage rates had me looking to see at what stage the increasing mortgage rates would be a problem for me. I have 2 scenarios:

1. Normal repayment
2. Normal repayment if I took out more for an extension.

Admittedly I have a smallish mortgage, more than half way through, especially considering where I live, and current salary. I am a cautious person too.

So for me:
25% on my current mortgage would still be doable (lucky I know - not trying to brag, years of being careful)
10% would be a real problem if I took out money needed for the extension.

Currently on a fix for another 18 months so this is theory for option 1. Option 2 could be more comfortable if I extend the mortgage to retirement (which I don't want to do really). Also all assumes earnings continue as they are and other CoL increases remain stable.

So at what mortgage rate would the tipping point be for your finances?

25% mortgage rate would be ok for you, aka opposed to the currently debated "dark times ahead" with 6% rates?? I'm so jealous..😀
I managed to remortgage for 4.07% (5 year fix) a couple of weeks ago, and wondered the same at some point.. our household would be at the tipping point with 12% rates, 10% would be ok-ish but would need to be super careful..

I find this one difficult to answer. My mortgage was up earlier this year and increased by a few hundred pound and it was fine. We’d have had space for a few hundred pound more (can’t be bothered with the maths on what that would be interest rate wise) but every single other bill also went up. Food and utilities astronomically, water and council tax a fair bit, Wi-Fi and mobile phones too.

Husband lost his job in April 2020 too (Covid) and hasn’t been able to replicate his wage since, and is only just coming up to two years in his current role so no security there just yet.

And we ended up with a BOGOF deal when we tried for another child so that’s obviously an unplanned massive cost.

I have always been so so SO cautious. But who knew so much could all go awry at once.

We have a commitment ending before our rate is up, so 5-5.5% would take us to the same outgoing payment of current mortgage and commitment. We'd be poorer in the sense that the money is going to interest not anything else, but we would feel the same as we do now in terms of money left as 'ours'.

I think once you get to 8,9%+ we'd really feel it. Theoretically we could manage, but life would be very different. I worry if everyone was like us and not putting our money anywhere other than housing, what would happen to many businesses etc. we are not particularly extravagant, but still manage some spending on fun at present.

I fixed one mortgage for 5 years at 4.2% that will be paid off by the end of the five years and is buttons. The next one i can refix in September which is the bigger one, that i think id manage up to 10%. Beyond that id withdraw my pension and pay it off which would piss me off but it would have to be done. At that point id out bid ftb and buy as much property for my kids as possible from the bargain basement

We're on 2.65% at the moment and I think we could double interest payments and we'd be ok with a bit of cutting back - so probably up to 5.5%?

Much more than that and we are looking at having to make major changes - fortunately I only work part-time at the moment, so I do have the option of going full time if needed. We could manage but as @whereeverilaymycat says, life would be very different and we would have very little, if any, discretionary income.

DC are in private school at the moment, so if this happens we would seriously have to look at moving them back to state, especially if Labour put VAT on school fees as promised.

We’re at 4.5% now because had to renew last December and it was a £400 a month increase. If it went much above 6% I’d have to extend the mortgage term to make the monthly repayments manageable.

We are on 1.77% at mo but overpay. If rates rose passed 8% we would be screwed.

I’m at 2.68% now.
Up to 4% I’d be OK
At 4-5% I’d cope
At 6-7% massive lifestyle changes
At 8% I’d have to sell (if not in negative equity. yikes.)

Not extending the term, or accounting for salary increases, we could go to 11%.

Probably to about 15% - but that's making some big cuts to other important 'bills' such as reducing pension contributions etc.

That would add about £1000 to my monthly mortgage so it would be a pretty dull existance at that level, but I'd still have a roof over my head.

We'd probably survive till over 8% assuming no changes in salary etc (we have over 3 more years before end of our 2.5%). Maybe could stretch further if we both worked 5 days instead of 4 (but would have to make sure due to increase childcare costs.

I can't really answer this as I have an issue with paying a lot just to service debt.

If inflation suddenly just stopped, then 9% ish. But if inflation keeps being awful then some of our slack has to go on cost-of-living so maybe even 6% will be a problem. However we have just started a 2 year fix at 4.5% so we just have to hope the economy stabilises before 2025.

We have 195k left to pay, currently on 1.99% that finishes this summer (35yrs)

Secured a new deal for 5 years at 3.91% (30years) when it was 6 months before waiting to see what happens.

Currently pay £730ish which will go up to £930ish.

Around 8-10% would really make us struggle; 1440-1750ish.

Our breaking point is around 10%. We would have to start cutting things like holidays, kids activities and parties if it gets to 6-7%. Hoping we can ride it out, increase take home pay and build more savings since we have nearly 4 years left on our 1.5% rate.

From the responses it looks like the media is scaremongering about rates and house prices crashing. The trigger isn't household mortgage repayments, it's bigger economic issues and pressures such as osing their jobs or health and being forced to sell.

Interesting because I thought I was overly cautious, but it seems most can cope with a realistic rate rise.

I've just signed the paperwork for a 5 year deal at 4.05% which was affordable by extending the term a little (1.9% now). That includes a £75k release of money. I suppose thinking in my head we could probably go up to around 6% before things got tricky.

My fixed rate is up in July 2024. Mortgage is currently £800 but will go up to £1,100 at current rates. 8% would be very painful for us. DS goes to school in September 2024 so I was thinking I would be flush then but all the spare cash from not paying nursery fees will have been sucked up by mortgage payment increase. As by September 2024 I will have been paying nursery fees for 6 years many things have been put on on the back burner to replace such as my 14 year old car which is slowly falling to bits!

I don’t think mumsnetters are very representative of the population though.

What do you consider a realistic rate rise?
Mortgage rates are already hitting 5%, 6-8% seems to be the limit for a lot here.

I think lower than 8% is realistic. I've not seen any forecasts predicting 10%.

We have had a tracker since 2015, and it has been steadily going up in line with base rate for the last year or so. It has been at 5.05% since February. Our payments went up by over £300/month with the last round of rate rises. At the moment we can afford up to about 10% on the tracker but it would be painful. We want to remortgage and looking 5 year fixes of around 4.5- 5%.

We’ve just fixed for 2 years at 4.8 which is an increase of £500 a month. We can do that, but couldn’t do any more without a serious drop in lifestyle. We’re only have one holiday a year, but we’re managing a festival this year and can have the odd night out. We do need to do some more work on the house and have some money set aside for that. Just got to hope they come down in two years!!

Similar to others, 10% is where we start to feel some pain. Hard limit is probably closer to 15%, but planning to have children in next couple of years so that (along with other lifestyle/renovation plans) would have to be put on hold.

I don’t understand everyone saying they could go to 10-15%

If we went to 10% it would be an extra £1000 a month and that just isn’t something we could even remotely find. We’ve saved hard overpaying the last few years but it’s all for nothing.

Our mortgage is up June 2024 and I’m absolutely terrified.

Anything over 10% would mean needing to extend the term. However I think society would be in anarchy before anywhere near 10% so not all that concerned.