How is everyone coping with mortgage rates increasing?!

[Undecided94]

This might be a thread for the money matters section but hopefully, it makes equal sense here.

Early 30s and looking to buy a house with land. The idea is that we will have more space for a home gym, home office and somewhere to keep my horse. I have found a house, it’s been on the market for 5 months with no offers so I’m tempted to make a cheeky offer.

That said, even if they accept the offer, mortgage would be around £2k per month! Add bills on top and it’s feeling scary. Is this normal? Our friends seem to have borrowed much more and earn much less but their interest rates are half! I’m looking at over 5%.

There is a cost either way, if we stay where we are, I continue to pay the monthly fees, which are less than the jump to the house with land but I’d have the convenience of having my horse on my own land.

The cost of living seems to have just shot up. It’s not just the mortgage rates. It’s absolutely everything! How are we all coping? Honest opinions welcome 😊

How is having the bigger mortgage on a day to day basis? We would be around 30% but bills would be quite high so it feels like a huge leap!

Council tax rates in my area has jumped up 35% in the last couple of years. That alone is a crazy amount per month!

I think you’re overthinking this.

If your mortgage payment is 30% of take home you will be just fine. Enjoy your house!

Yea prices may rise in future but your uplift will easily be affordable with the gap you have. Your friends who had a lower mortgage rate may find remortgaging challenging!

You'll be fine. You have a horse so by definition have plenty of disposable income. If it gets to too tight just sell the horse and that the monthly saving with cover the gap.

This is a "my diamond shoes are too tight" type thread.

Think about the mortgage term, are you needing to take it over 30 years for the cost to be £2k, if so I wouldn’t do it because you have little wiggle room if things change financially. Also think about your loan to value - the more you can put down as a deposit the better. I think £2k a month for a home where you have a 10% deposit and a 30 year term is very different to £2k a month over 25 years and a 25% deposit.

If it’s 30% of monthly income you have £4k plus for other bills and expenses, will that allow you to save and to have a decent standard of living. What if one of you looses your job or needs to take a step back for a while. Do you have kids or planning to have kids? It’s not just what you can afford now but how you anticipate and plan for life changes that may be on the horizon.

I see you haven’t bought yet so when you are working out how much you can repay each month based on it on a higher interest rate

people have got a false sense of security the interest rates have been artificially low for years and people stupidly think this is the norm and over commit

It would be a 20 year term with around 40% deposit. We need to renovate the house hence the larger mortgage.

I think it would be difficult to save as we are planning to start a family next year. We have a very nice lifestyle right now so that is part of my worry but we are willing to scale back on the holidays to have a more suitable home.

12 acres for £2k/m actually sounds amazing. That’s 2 bed flat money! I’d so love to have a bit of land.

In the 80s the rates were far higher. We’ve had very low rates for ages. I can afford my house as thankfully I only owe 1x salary so it makes little difference. I feel for youngsters looking at 5.5x double salary to start :/

Are your jobs protected from AI? If all out war broke out involving NATO countries within the next 5 years, would your jobs be vulnerable/obsolete? If your house price tanked due to war and you needed to sell, would you be in negative equity?

I would always imagine worst case scenario as we're getting pretty close to that even now.

Ok so you need to think about how you’ll fund maternity leave, future childcare costs and a possible drop in salary if you or your partner want to reduce hours to care for a child.

It’s not just about dropping holidays, it’s the foreseeable things that will change your earning capacity. The mortgage sounds fine with current income, but add in future childcare costs or a percentage drop in income and see if it would still be manageable.

You could look at what a 25 year term would do to your payments, would that allow you to save for the inevitable curve balls that life tends to throw at us?

We’re still on our 1.6% mortgage, it’s going to be a huge jump when we have to remortgage. There won’t be many people left on very low interest rates by this time next year.

It can be stressful at times, dp is self employed so there's times where he doesn't have enough work but thankfully he's had a good couple of years, we have a toddler so I'm limited on hours I can work to save on childcare etc. we don't go without as such but we also don't spend frivolously or have massive outgoings. I'd suggest writing every single thing down and see if there's anything you can do to save some money, food shops / unnecessary subscriptions etc, I have free Disney, hbo and paramount for now so I just rotate on free offers for example. Shop around constantly for everything. Balance transfer credit cards for big spends, I have 3k on one but I have 36 months interest free on it. See a coat? Check if it's cheaper or wait for a sale for example. 30% is high but it's doable with a few tweaks in my opinion. Good luck!

Also, with the food shop, have a look at every single time you go to the supermarket etc, I was doing a lot of top of shops that I didn't even realise really, I now do an online shop once a week and that's it, it's saved a small fortune.

We have investments so there is a cushion to fall back on if push came to shove. We also have money set aside for maternity leave. I am the higher earner so this was put aside ages ago.

Unlikely I would go part time, even if I wanted to, it doesn’t make financial sense and I don’t have the type of career you can dip in and out of. Also, to answer someone else’s question on our jobs and AI, I think we are as secure as we can be. Never say never but if anything, AI is probably going to keep DH in work if not accelerate it.

We deliberately didnt stretch ourselves when we last moved house. We borrowed just under 50% ltv, and kept the term to 21 years, also only borrowed just over 2 x combined income, this meant we could access the best rates. Have a 5 year fix at just under 3.9%.

Test yourself. Are you borrowing:

• more than 3 x combined income? Don't. This was only affordable when interest rates were suppressed to unusually low levels.
• more than a 25 year term? Don't this is how banks try and get you to borrow more than you can afford. If you have to stretch the term to borrow what you need, you cant afford it.
• high LTV? Unless you are a first time buyer, aim for an LTV under 75%, otherwise you're not building your equity proportion and almost all your repayment goes on interest.

We bought a house with land in 2024 and took our 3 x horses out of livery and had them home with us and it’s the best thing we ever did. The extra cost for higher mortgage is going into your home snd the future and not the pockets of the livery. Makes sense!

Food for thought! Really grateful for everyone’s advice/ opinion. I am pretty set on moving but it may be that we look for somewhere that doesn’t have the land attached but we could purchase land nearby.

Whilst we are fairly young, I think we can stretch ourselves beyond what we are now and still live comfortably. It just feels like too much of a leap to buy the bigger house with land and extensive renovation works. If it didn’t need renovating, it would be much easier as we could put all equity into the purchase.

Our house had no land but fields next to it which we bought off the farmer for low price. We checked that we could build stables and a menage on it which we could and it was cheaper all in than an already set up equestrian property.

mine has never been lower than 5% - cirrently 5.4% so ive just always had very high payments

So 60% LTV and a 20yr term sounds very reasonable.
The 30% of your income is a red herring, if you have horses then your 'hobby' is an expensive one and not one you can instantly cancel.

Is the renovation straight forward or is it everything out and start again?
The renovation cost would concern me more than the mortgage, its less certain and very easy for to blow a budget.

I would do a comprehensive budget covering the lifestyle you would like an another budget with must haves.
Do the same with the cost of your horses and see how much of a gap you have.

Houses with sensible land are quite hard to find, so its worth exploring it

" If the demand for housing isn’t there, or will shortly be collapsing then why has Burnham just committed to what is in effect another help to buy scheme?"

Because the demand isn"t there is the short answer, not at today"s asking prices, help to borrow schemes are designed to help developers and leasehold companies who are likely registered "offshore". The big difference between renting and a mortgage is that you can leave a rental but you can"t leave a mortgage debt, if landlords try to hike rents too far even more young people for example will wait it out at parents, they can remain solvent longer doing that than a leveraged landlord can fight increasing mortgage costs and council tax costs, plus Labour threatening to confiscate the house if it is empty too long!

As I said, if yields spike (look at France today for example) your goal of no housing costs (you do know that you will have to pay for repairs and upkeep?) in retirement will be a very expensive road to follow, you would be better off finding the cheapest rental possible (and being prepared to move if even cheaper pops up) and save a similar or greater amount monthly into a money market fund or similar to buy a property for cash in retirement.

AB got the memo from developers - "DO SOMETHING!" So his solution is to try and lure financially uneducated and vulnerable young people into multi-decade mortgage debt for basic shelter.

https://www.standard.co.uk/news/london/london-new-build-home-sales-houses-property-b1292587.html

Excellent advice, unfortunately too late though for all the people now locked into the debt ladder/property Ponzi scheme.

A really fantastic dog walking field might be something to consider. They're not all created equal - I've been to some that are literally a fenced off bit of grass, a bin and a field shelter. Others I've been to have been really well done - agility equipment, planting and paths to make it feel like a proper "forest walk", pond or swimming spot etc. For those, people would absolutely travel and pay a premium. Obviously takes outlay in terms of setting up a booking system, insurance and ongoing land management (the latter of which you might have to do anyway to a degree) but very little hands on time during the day as people just book and let themselves in.

Won"t this sort of expense be the first thing to go though as mortgages get more expensive to maintain?

£2000 a month mortgage is standard these days unfortunately. Ours has recently reduced to £1900 and we only have a semi detached three bed. Our interest rate is 4.32% on around £380,000.