Mad mortgage sob stories – what am I missing?

[amluuui]

I've seen a couple of slightly mad stories in the paper in the last few days, of people who have owned their homes for decades, yet have been on interest-only details. And now they're suddenly panicking about interest rates.

Like this bloke, who seems to have owned his house for over 20 years, remortgaged to pay for improvements and still has nearly half a million left to pay off.

He says: "We’ve geared our lives around the low interest rates of the past 13 years. I am the only earner in the family. If interest rates hit 6%, I’ll have to find an extra £1,480 per month – well over double what we pay now. That is totally catastrophic for our family, absolutely terrifying.”

Can anyone explain why on earth he thought this was a good idea? What would his rationale have been for doing this? (As a renter who is trying to save to buy, hell no I don't want to bail him out.)

Another woman here, who's owned her home for several decades and is on an interest-only mortgage. Why? It does seem she's had health problems, which is rubbish for her, but how was she planning to eventually pay off the mortgage?

Am still getting my head around mortgages and genuinely want to understand this, if anyone can help. I thought only landlords got interest-only deals?

There is zero chance that anyone buying in 2 or 3 years time will find it easy. If buying a house were easy, then everybody would be trying to buy one, thereby pushing prices up.

We are an overpopulated country without enough houses. This means that buying a house must always be difficult. When you have a limited resource, a certain percentage of people must always be priced out.

The greater the mismatch between the number of households and the number of houses, the greater the percentage of people that must be priced out. If prices fall and builders stop building, then the situation may get worse, not better.

Yes @Isinglass20 things don't happen in a vacuum. All this fails to acknowledge the far reaching consequences of people having no money to spend on anything but essentials etc.

The first example in the bbc link seems to be a fixed deal switching to the SVR and they subsequently chose a tracker saving £700 on the £1400 increase (but unfortunately still £700 more than the current payment)
So they potentially could also have looked at another fixed deal. It would have undoubtedly been more expense than their current fix, but likely less than the SVR. Leading on the max figure is more impactful for the article.

Some people will have been reckless, wilfully. Some people will be in a risky position because it's the only position they have. But most are just people trying to get on as best they can for themselves and their families, just like they have done in previous generations. I have just shy of two years before I lose my fix and I'll do what I can to be in the best position possible by then. Beyond that, it's just hoping it works out ok.

That was my response to the poster who'd said buying in the 90's was easy
Your argument however seems to be that house prices won't drop because of demand. I disagree. But we'll see in a couple of years anyway.

AS long as that happens after the Tories have won the next election, why would they care.

And if they don't win the next election .... why would they care ?

All this "Jeremy Hunt summit" window dressing is to kick the can down the road for ... ooo, let's say 6 months to a year ?

This is why I believe if we can all just hold tight until after the election things will be okay

We produce very little in this country. If we all stop buying what little is produced - it seems to be mainly cars as far as I can see - we start exporting which is good for GDP. We’re already the sick man of Europe - again.

This. Its really a huge gamble if you take an interest only mortgage without a repayment vehicle. A family member bought a house two years ago on interest only and is now intends to sell it hoping to make money but house prices have fallen so its doubtful the plan will work. He has basically been renting from the bank if you think about it . He had hoped to create a lump sum from the sale and then rent something small but rents have gone up too as many buy to let landlords have mortgages to pay too. Not a gamble I would take personally but each to their own

we start exporting

What, pray tell ?

This we also insisted on a repayment mortgage. Only 8 years left !

Conservative MPs ?

All this stuff that we apparently manfacture and will supposedly cause financial chaos if we stop buying. I was being facetious because obviously manufacturing in this country is a thing of the past.

manufacturing in this country is a thing of the past.

Depends how you define "manufacturing" (which ironically derives from "made by hand" ...).

Mass manufacturing, almost certainly. But there's still plenty of low quantity high value tat we can still knock up. Just look at the Royal Family.

This happened to me, very clever lying and I was an idiot and believed them being quite naive. Oh how I despair now.

It tends to be tourists who buy low quantity, high value tat, surely? And we want them to spend more.

@Grumpyoldpersonwithcats

I suspect that buying in the 90s was easier because the population was smaller. Therefore the mismatch between the number of houses and the number of households wasn't so big.

You misunderstand. I didn't say that prices won't drop, I said that it won't get easier to buy a house. The price of the house is irrelevant.

If there are 10 people wanting to buy a house, and only 4 houses, then 6 people must be priced out. It doesn't matter whether the average house costs £500 or £500000, only the top 4 will be able to buy.

I don't understand why people seem to think that lower house prices will mean that more people will be able to buy a house. It's more likely that the opposite will happen. The ease of getting on the ladder is determined by supply, not by price.

Monthly exports were running at £500 for every man, woman and child in April - looks like we're still manufacturing some stuff.

@Grumpyoldpersonwithcats

Thinking back to the 90s, when the average factory worker could afford a house, this wasn't simply because house prices were lower, it was because there were more houses available, so a greater proportion of society could buy a home.

Even if prices fell by 75% now, the same factory worker wouldn't be able to buy, because there are only enough houses for the higher earners to buy. Lower earners will still be priced out.

I think a lot of people don't get this, and think that a fall in house prices will enable their kids to get on the ladder. If they need a mortgage, then it won't. It will make it harder.

As you say though, the "smart"thing you did was bought in 1992. Or should I say, being born before 1972. Your birth year would have more more difference than any frugality. It's quite smug and unrealistic to compare yourself to anyone under 50.

Literally i was still at school in 1992, by 1994 i had a summer job in an estate agents and could have bought a number of houses for £40,000 which was 3 times the salary my entry level job, with A Levels.

Buying a house 3 times your entry level salary? People can only dream of that these days.

@GreenestValley I think because they stayed the same for so long, they didn’t? Certainly not a rise of x3 anyway

I wasn't even bloody born in 1992.... no hope did I.

We were renting a 1 bedroom flat for £700pm, ended up moving to a 2 bedroom flat for £1000pm and bloody saved hard whilst we both juggled 2 jobs before DS1 was born so we could get onto the housing ladder. A 2 bedroom house first, done it up and sold for a profit so we could , move to a modest 3 bedroom house (although 3rd room is a study, not sure it could be a bedroom tbh) closer to the school and nursery so DH could walk them there (we only have 1 car, which I need for work as I travel around). Our mortgage for that 3 bedroom house is currently £800pm which we were managing well (I've been lucky to have a couple promotions) but it's going to increase by 50% in October!! And then it's no longer manageable, not alongside everything else increasing, we will be in the red unless DH can pick up extra shifts but those aren't guaranteed and ofc if people are not spending as much then he won't be needed as much

I am on an interest only mortgage because it was the only way I could afford to keep our home when divorcing my narcissistic ex. I've got 18 months to go on a very low fixed rate, and I am worrying about my options when it expires. I don't regret it though. It means that I have been able to keep my children in the home that they knew and at least give them that little bit of emotional security.

Ha. The 90s were easy. Were they fuck. I was living with my Dad at the time) only a child just in secondary) and every single week for months/years we were terrified we were going to lose our home.

It was horrible.

He held onto it, still suffers from that effort.

I don't want that fear and insecurity for my children or for anyone else.

Yeah I agree. It's lazy thinking to say "the 90s were easy" (not for all the people in fear of being repossessed or actually getting repossesed) or "it's easier these days for young people".

It's very hard for young people these days to get/stay on the property ladder and it was very hard in the 90s too. And indeed the late 80s when I got on the property ladder.