Circumstances have changed....are the implications?

Pipkins_Pipkins

Hello, I'm new here. Hope you don't mind me ploughing straight in with a question....I'm feeling a bit worried.

Up until last summer I had quite a good job earning £50-55k but was made redundant and decided to retrain. I'm now coming to the end of my retraining and will be earning about £22-23k a year. My husband earns £25k.

Our mortgage is on a 2 year fixed deal at 5.72%, due to end in 14 months. We owe £238,000 and are on interest only at the moment due to our circumstances.

When our fixed rate ends will we be able to get another mortgage? Will we have to go on the variable rate? Should I be declaring my change in circumstances to the building society?

Although our repayments will be large in comparison to our salary we don't want to have to move if at all possible, we'd prefer to be stretched a little for the next few years and hang on to the house in the long run.

Our LTV is currently about 80%. We have never defaulted on any payments.

opinions4u

Pipkins_Pipkins wrote: »

When our fixed rate ends will we be able to get another mortgage?

Not with another lender, unless criteria is far more relaxed than I thought.

Will we have to go on the variable rate?

This depends on the lender. Who are they? SVRs are actually quite cheap at the moment, so in the short term can be a good thing.

Should I be declaring my change in circumstances to the building society?

Only if you find yourselves in a position where you are unable to make the full payments.

Although our repayments will be large in comparison to our salary we don't want to have to move if at all possible, we'd prefer to be stretched a little for the next few years and hang on to the house in the long run.

At some point, preferably while interest rates are low, you will need to get back on to repayment. If you genuinely cannot see yourselves being able to do this, you'd probably be best moving sooner rather than later. If interest rates were higher, how would you ever get off interest only?

We have never defaulted on any payments.

Best to keep it that way.

Good luck.

Pipkins_Pipkins

Thanks for your comments and advice. We are with C & G at the moment.

We definately want to get back on to repayment as soon as possible. Their fixed rate is 2.5% at the moment. The plan would be to pay as much as possible (certainly match what we have been paying on interest only on the fixed rate) while we can.

I know nobody knows the answer to this question....but....I'm guessing interest rates are likely to remain low for the next couple of years or so? By which time hubby and I may both have received pay rises, etc etc. If we can get through the next couple of years hopefully we will be Ok in the long run.

opinions4u

Pipkins_Pipkins wrote: »

I know nobody knows the answer to this question....but....I'm guessing interest rates are likely to remain low for the next couple of years or so? By which time hubby and I may both have received pay rises, etc etc. If we can get through the next couple of years hopefully we will be Ok in the long run.

You're right. Nobody knows.

My view is that they will be low for 12 mnoths and start rising very slowly for a few months and then we'll see a sudden upward 'lunge' in BofE rates, probably to higher than 6%.

The big problem is the outcome of 'quantitative easing'. The government has printed lots of money and its sloshing around in the economy waiting to be lent and spent. At the moment it's having little effect because not much lending and spending is happening.

If we get to a point where the nation collectively thinks that the recession is over, and we all start borrowing and spending more again, then demand could grow too rapidly, pushing up inflation and need to be countered by interest rate increases.

A counter argument to that is to suggest that the huge tax rises needed to repay the debt will actually dampen demand enough to control growth in demand and keep interest rates low.

What will happen in reality? no idea!

We are with C & G at the moment.

I believe that they offer existing borrowers a range of trackers and fixed when an existing mortgage product ends. That doesn't mean that they are obliged to.