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?

OK, I'll try. There are two completely different issues going on and people are conflating them and getting muddled up.

1. The first issue is that people are priced out of owning homes, or owning homes similar to their parents generation, because house prices have risen so much more quickly than salaries. That's where your example of teachers and nurses no longer being able to afford the same size houses previous generations of teachers and nurses comes in. I agree that this aspect of the housing crisis is much much worse than it was in the 90s and it is much harder to get on to the property ladder in the first place. This issue has inevitably been raised on this thread but wasn't what the OPs original post was about.
2. The second issue, and the one raised by the OP originally, is the mortgage affordability crisis due to interest rate rises. This is an entirely separate issue to house prices. Mortgages are much the same in terms of affordability now as they were in the 90s in that the formula has stayed the same and you can still only borrow 4 x your annual income. So when the interest rate rises on your mortgage, your repayments rise proportionally to the amount you owe, and that in turn is proportional to your income.

It is not the mortgage interest rate rises than are pricing people out of home ownership, it is rising house prices.

I think that maybe the situation is exacerbated by building companies getting greedy. On a new development near us recently the tiny two bedroom houses were priced at nearly £300k !

10 years ago we went on a brief lookey-see at some new housing near us. After carrying a wheelchair over the gravel (the salesperson told us they houses "weren't social, so that's why there's no access") a big point was made of how the developers were releasing the houses 200 at a time "to ensure prices stay up".

Says it all really.

The build quality was shite. Apparently I'm the arsehole for thinking that having to employ a firm to deal with the builders expected fuckups is perhaps odd.

The final kicker was realising that the actual square footage for a 4 bedroom house was less than our current 3 bed.

I don't think my comment about being exited that go-karts must be making a comeback given the size of the garages went down too well.

Any housing "crisis" in the UK has been engineered to maximise the profits for developers and landlords. With zero regard for what that might do to society. But then - as we should remember - "there is no such thing as society". And boy, do some people have good memories for that.

Any housing "crisis" in the UK has been engineered to maximise the profits for developers and landlords. With zero regard for what that might do to society. But then - as we should remember - "there is no such thing as society". And boy, do some people have good memories for that
@SerendipityJane I agree with this, but surely we are now in a position where developers have a load of houses that they can't sell because no one can afford to buy them?

surely we are now in a position where developers have a load of houses that they can't sell because no one can afford to buy them?

Do you really think that would worry them ? Why do you think you don't pay council tax on an unsold (and therefore empty) house ? Coincidence ?

Also in business, if you lose on a deal, you can write it off against tax.

When the people that play by the rules get to make the rules, over many years, then what do you think happens ?

When the people that play by the rules get to make the rules, over many years, then what do you think happens ?
I'm a bit confused by the question, did you mean to say 'the people that benefit from the rules get to make the rules' etc?

Well more the reverse. The people that make the rules, benefit from them.

I agree, whoever has power uses their power to entrench and extend their power ...or in other words power corrupts!

Exactly that.

I am paid the national average salary for a woman my age - which is about 30k.

As a single person I could get a mortgage for just over £135k.

To buy a small ex-council house in a small town in the West Midlands, thirty minutes drive from work, I had to find a deposit of just over £40,000.

I would never have done it without being left a percentage of my grandparents house on a London commuter train line. Never. Not with having to pay rent.

How many of those things are essential though? Certainly not having expensive tv and phone contracts, Spotify and having multiple cars.

The trouble is that people have become accustomed to these luxuries, and are unwilling to cut back when they are struggling with the mortgage or rent.

My mobile phone contract is £12 per month and my streaming subscriptions run to about £25 total. I’m pretty sure giving them up wouldn’t get me a deposit on an average house in less than several hundred years.

In regard to cars, the world these days is set up for cars - public transport is generally either not available or inconvenient (small village near me - 1 bus to nearby town getting in at 10.30, one bus back leaving at 3.30 so useless for either full time work or school. I would say multiple cars often are necessary.

I’m lucky - my ‘saving for a deposit’ was firstly 25 years ago (£60,000 property - no, I haven’t missed out a zero) and secondly involved me telling my parents ‘I’ve found a flat’ and them giving me the deposit money.

That doesn’t mean I don’t understand how difficult it is for people in their 20s these days.

Hence why I used the word expensive. You are clearly sensible with your money. However I know people who spend hundreds per month on phone/tv contracts and car leases etc, and then complain they can’t afford a house deposit.

@Doris86
Totally agree, what many think of as essentials are mainly luxuries.
Many deride the older generation but most lived within their means. My parents always travel with a flask of tea and a box of sandwiches, the younger generation are happy to shell out on barista creations and pannis at the same time complaining they can't save anything.
An acquaintance of mine spends over £250 an month on media subscriptions, phone tablet payments and doesn't see that as £3k possible savings.
When you add in £410p/m car payments aswell (nearly £5k p.a) then there's nearly £8k that could go to a deposit.
Trouble is they wouldn't be seen dead without the latest phone in an old run about for transport.
Generally you can't have your cake and eat it!

@SerendipityJane totally agree
my son looked at a new build flat the second bedroom you couldn’t fit a single bed and wardrobe in
it would have to be one or the other
basically a one bed flat wanting to be a two bed 😂
and at 250k not worth it at all
a two bed house ( new build ) was 315 and not much bigger

Exactly! same for us. Our bank stress tested us and we didn't overstretch ourselves. So glad now.

Sure but when you did those calculations did you also know that energy, food, childcare, EVERYTHING would go up as much as it has?

We’ve fixed again for 5 years and luckily we can afford it but there’s no need to be smug that you ‘planned better’ than others. For some people this is the straw that breaks the camels back when the cost of everything has increased so much, and their wages haven’t.

She didn't mention expensive though, you added that. And she's 100% right about mobiles (contracts usually the cheapest option) and broadband being total essentials in 2023 that weren't needed at all in the 90s. The fact that some people undoubtedly spend more on these things than they need to doesn't affect the point.

Exactly! same for us. Our bank stress tested us and we didn't overstretch ourselves. So glad now.

I think everybody's bank stress tested them. You're not special!

Oh, please. There is nothing to stop people from educating themselves except laziness and stupidity.

The difference now is that home ownership has become so unrealistic for so many that the desire to save isn’t the same as it was ...

Up to a point yes, but not everywhere's crazy expensive and it's still perfectly possible for people on an average salary in many areas

Or at least it is if expectations are modest. I sold my last house to a lovely young couple just starting off, and oh my the things they were buying to put in there ... the vast American style fridge freezer, the £6k leather suite they'd seen and just had to have and much more

I thought of mentioning that I'd started out with second hand white goods and the cheapest tubular frame three piece suite, but it wasn't my place and anyway I doubt it would have gone in

Oh, please. There is nothing to stop people from educating themselves except laziness and stupidity.

That's a bit unfair. There are lots of reasons why people choose not to educate themselves. You can't just pick on two at random.

There's certainly nothing to stop people educating themselves about why many people don't educate themselves except laziness and stupidity.

Better spend that time educating oneself.

I come from a life where going to the library on a Saturday was called out as "cheating" by the kids in class who didn't get good marks. No one forced me to. By the same token, no one forced them to roam the streets.

Well done you.

Outliers aside, socio-economic issues including poverty, lack of opportunities and instability are complex. The idea that everyone could be as brilliant as <<insert random speaker>> if only they weren't so stupid and lazy is a tool to prevent those in power taking any accountability or acknowledging privilege.

TL;DR is that it's always somebody elses fault ?

Educate yourself.