Is the mortgage rate due to go up again?

hampshiredave

Hi guys,

Myself and my partner are first time buyers, and have had an offer accepted on a property in Hampshire. Unfortunately, our offer was accepted after the mortgage rate went up, putting the payments up by a good £40 a month. C'est la vie I know, but we have just had word that the people we are buying from have pulled out of the purchase of the house they were looking at, and are looking for something else.

Now, while the EA has assured me that the house is still ours from a sale point of view, my partner overheard her boss saying the mortgage rate is about to go up again very shortly?! If this happens again, we are going to struggle, and might have to pull out and look for something smaller and cheaper.

Does anyone know if this is the case? Why does it keep going up (niave question but this doesnt seem like the best time to go it alone in the big wide world)

Woby_Tide

if a quarter point raise is going to hit you that badly I guess you're on a £200k ish mortgage so assuming youhaven't gone fixed rate then you definitely appear to be overstretching. Have you taken the other bills into account aswell?

Jonbvn

Most newspaper's are predicting another rate rise to 5.75% as early as next week, with 6% likely within the year. The BofE is raising interest rates in an effort to reduce inflation.....(google for more)

Due to your concern with the recent rate rise, I would seriously reconsider your position, and/or consider a fixed rate mortgage.

dunstonh

I think another quarter to a half is possible this year. Obviously we can only make estimates and judge on what we think. Inflation fell back a bit last month and mortgage lending the lowest for a while so it may be that we are getting near the top of the cycle.

If you are going to stuggle on just quarter point increases, then you really need to be looking at fixed rates as the rates are still historically low.

going2die_rich

I have to say if you find £40 extra a month a struggle you are really over stretched and it's better to step back and let the property go and find yourself something more affordable.

What would you do if a month into owning the house the boiler went and you had a bill of £1500 for a replacement? Or if you had a electrical issue costing a hundred or two? If you can't afford £40 extra a month, I doubt you'd be able to handle any of them instances.

Don't over stretch just to buy something you will worry and stress about every day of the week on affordability. You'd be far wiser to buy smaller and build up more savings for the next time you buy. That way if anything unexpected does come up in terms of costs, you can dip in to your savings. Obviously it's disappointing if that were to happen, but at least you could sleep at night knowing the roof over your head is safe as you can afford it.

Interest rates will go up, it's just a matter of time. So don't gamble with your future for a few extra metres of floor space in a house.

hampshiredave

*sigh*

we have a quote for a fixed rate mortgage with Northern Rock for 155k, and that is currently worked out at 975 a month @ 6.35 percent (based on purchase price of 143950 and includes a 10k loan, and all fees paid). It leaves us both with a good 300 a month after all bills have been paid, and our deposit of 4k is still safe in the savings account. Its not that we will have no money, or will be extremely stretched, its just we are so anal about our finances ( i used to be heavilly in debt, and have worked myself to a position where on 20k a year with the fiance on 18k a year, they have offered us 200k worth of mortgage for a first time buy - i've learnt the hard way about money), that we do not want to push ourselves too far out of our comfort zone

Jonbvn

HD,

Since you are on a fixed rate deal, I assume for at least 2 years, movement of interest rates now is not overly important. However, please consider that when the fixed rate deal ends, you will have to pay a lot more on a SVR mortgage. You can remortgage onto another fixed rate, but who knows where the IR will be then.

Shambler

If you aren't too good at controlling your finances then now would be a good time to start!

Put some money away each month in a high interest account to help pay for any future interest rate rises.