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?

I don’t think there is a specific threshold, but considering that mortgage offers are based on 4-4.5 times income, incomes have risen, but fallen in relation to inflation, and interest rates are projected to rise again, there will be an increase in defaults. I don’t know if it’s a smooth line, but as interest rates rise, inflation rate rises or fails to drop by much, more households will tip into default.

We are actually a bit fucked right now in the UK, other similar countries have some of the same issues we have, but not all of them at once.

People on here just seem wealthy, private schools , foreign holidays a few times a year so they can manage rate rises. mumsnet is not representative of your average mortgage holder, it really isn't. Some have no idea how the other half live / survive !!

I don’t think this thread, or mumsnet in general, is remotely representative.

I know people especially those who’ve privately rented before buying house will sell everything they own before defaulting on their mortgage. I would use a food bank first.

I think how hard you get hit by mortgage rate rises depends very much on what stage you're at. We could endure a 10% rise in 4 years because we'd only have 15 years left and kids will be older. If we had to remortgage now even 7% would be unaffordable.

It’s naive to believe that prices won’t be affected. We’re considering trading up and compared to even one year ago the interests rates are so much higher.

To illustrate, we were looking at borrowing £200k more at 2% interest. over 25 years that is £848 monthly repayment, and we would have repaid £254k in total to the bank over the 25 years.

The same sum at 6% interest is £1,289 per month and paying £386k over the term.

So in effect, for us the cost of buying a bigger house has risen by a third, just because of the change in interest rates.

To keep to the same monthly payment/total amount repaid with a 6% interest rate means that we would borrow £130k not £200k.

When I first had a mortgage, I was "lucky" as rates had fallen to a mere 15%. I've always stress tested to that level (people did think I was reckless though, because I'd have been in trouble particularly in the early days if they'd gone back to around the 20% mark

Honestly? We couldn't cope with the current interest rate if we had to remortgage for some reason. Our mortgage rate is fixed for 10 years, from summer 2022, due to a hope that we'd have a second baby in that time (and I'm currently 28 weeks pregnant). We're essentially gambling that in just over 9 years time, since we'll be past nursery fees and one child will be out of pre/post school childcare too, and combined with salary increases and the small amount of overpayments we've managed to make in the meantime we'll be able to afford whatever the rates are at that point. If not, we currently have enough savings to be able to make several months of mortgage repayments to allow us enough time to sell the house (though how much of those savings will exist after maternity leave remains to be seen!).

We could go 8%. I haven't tested higher but suspect we could absorb more if we cut food quality and dropped swim lessons.

However, our mortgage isn't as big as most and we are overcrowded in our flat.

I don't know if we can get a bigger place anytime soon because mortgage isn't my main problem- nursery fees are!

I've just repaid my mortgage this month. I have a number of btl houses and only 4 are on fixed rate mortgages. I have another 5 on trackers and they go up virtually every month. I'm going to have to increase the rents at the end of the year period.

a mortgage interest rate of 10% would be more than 30% of our household income. We would be ok at mortgage interest rate of 9%.

I think prices would be affected. Logically it should. But in australia where they have much higher interest rates, the housing market there is recovering, driven mainly by older buyers who don't need mortgages and are enjoying high interest on their savings. . it might be a dead cat bounce but who knows.

I wanted to upsize to a bigger flat too so i am naturally unhappy at this. I am just praying that as mine is a more lateral move, it would work out.

@RancidOldHag when exactly did they had 20% on a non-Sublime Mortgage ? Honestly, it makes me laugh out loud 15% was literally for a matter of months I believe, although my ex was on some sort of tracker and I think they hit 15% for him for three days.

18.45% was the historic high in 1981 according to Google.

I can’t find 18.45% as being the high, Of course Mortgage is a usually above the base rate so nobody can comment on individual circumstances for 20% is ludicrous I’m sorry. Nobody likes to ruin a good story with facts, but I think we need to get some perspective here.
my uncle had an absolutely ridiculous Sublime mortgage in 1990, something he should never of been allowed to borrow what he did, but even he came out of it relatively unscathed with a smaller but perfectly adequate home

When we bought our mortgage broker said we could borrow £380k
As soon as they established my husband and I were self employed AND I'd only been self employed 2 years that figure plummeted to half.
Our mortgage doesn't expire for 3 years and at the same time a loan on our kitchen ends.
Interest rates at 10% would be the same as our mortgage, overpayments and kitchen loan.
Genuinely us being able to borrow half has been an absolute saver.
Yes, the house was a mess and needed lots of work, but we're now in a far better position than many others. Were fortunate to live in an area where you could buy a house for £250k (now it's closer to £400)
To those saying Mumsnetters are rich and not representative: Were not rich, were not harder working or smarter than anyone, were just exceptionally fortunate to be in the right place at the right time

We WERE going to buy at 4.89%. Didn't end up happening.

If we'd owned that house and had to absorb a rise to 8.5%, life would be miserable.

Anything much above that and we'd probably would have sold up and downsized because it was not my dream home and the mortgage repayments would not be worth the complete and utter decimation of lifestyle above 8.5% would cause.

The only reason we could potentially afford rate increases is because we've been paying 3x our mortgage amount in childcare costs for the past 8 years but both DC are now in school so we suddenly feel much richer. This will be the first year since 2015 we've taken a 2 week foreign summer holiday. Our mortgage also started small as we live in a cheap area. We wouldn't survive rate rises on a property in London or the South East.

Our current mortgage is very but it is temporary because we will need to borrow a lot for our next purchase (with a very decent deposit) - we are in London.

We could probably cope with rates going up to about 15+% but looking at what we'd be paying when we eventually move - a max of 10%. But, we would probably wouldn't move if that's what rates are looking like.

I meant very low.

So now there are predictions of 7% (in the Daily Moan). I thought I'd resurrect this thread.

Our net income is £6300. I think £2200 is the threshold for affordability- 35% of net income (we overpay £1k per month anyway in addition to our £1k mortgage). £2200 mortgage payment would mean 10% mortgage interest rates. We could manage ok on that. We could probably manage at 11%.

Due to remortgage in July 2024.

I think 12% would be very hard.

I think we are going to end up staying out which I really don't to do. We could manage payments of about £2500 but i wouldn't want to do that for an unknown period of time. Things just seem so unstable.

I have pets in my spare room but as morbid as it sounds, their lifespan is up to 4 years (2026). So since I don't really want to have a baby until i know what my mortgage payment will be (July 2024), baby will be with me for one year and also incubation period of 9 months, our 2 bed flat can work for us. We would like to move and thought it was better to do so pre baby.

But perhaps our 2 bed flat could work for us and we can also buy when the market bottoms out, probably in 2025 to 2026. In worst case, we can wait till baby gets free hours at age 3 and then move in 2029 (would be in flat for 10 years so should have build up sufficient equity by then). We want to stay in our area and in a 3 bed flat so should be able to move by then. It is a bit disappointing as we had pay increases in the past 5 years and thought this would mean we could upgrade to a bigger flat but i think we just have to be grateful for what we have. We do love our flat and we have each other and we can withstand 10% mortgage rates, thats a lot more than what others have.

I could go to 10% but over that I'd really feel it.

I was raised hearing about the 15% interest rates of the 70s so I made sure we could stretch to 10% if we really had to before taking out the mortgage. I thought I was being overly cautious at the time, but seems more sensible now!