How are people actually coping with mortgage payments increasing?

IAMIAM

Mine, is without a doubt, practically doubling when I renew....but my mortgage payment is small, circa £600 a month up from £370ish. 

I dread to think if your mortgage payment is £1k and its suddenly £1.75k a month or god forbid around £2k to £3k.

Just wanted to hear what people are doing to support themselves. 

K_S

@iamiam What I'm seeing clients doing to get more flexibility -

Mortgage related -
- extending terms to the maximum possible with appropriate lenders
- converting to part-and-part or I/O
- using savings to reduce capital owed
- overpaying as much as they can

Non mortgage related -
- cutting large discretionary expenditure like holidays
- reducing pension contributions (not something that's within my remit)

IAMIAM said:

Mine, is without a doubt, practically doubling when I renew....but my mortgage payment is small, circa £600 a month up from £370ish. 

I dread to think if your mortgage payment is £1k and its suddenly £1.75k a month or god forbid around £2k to £3k.

Just wanted to hear what people are doing to support themselves. 

EnterUserName

@K_S Interesting, what typically are the criteria these days for switching to IO?

Do you normally have to put an equivalent amount into a savings vehicle? I'm not sure how that would help if you are strapped for cash - or does the maths work as you are only "saving" for the capital and have no interest to pay?

To the OP, we are biding our time... Our only credible options this time next year, if rates go as predicted, would be to get a lodger or sell up!

ACG

IAMIAM said:

Mine, is without a doubt, practically doubling when I renew....but my mortgage payment is small, circa £600 a month up from £370ish. 

I dread to think if your mortgage payment is £1k and its suddenly £1.75k a month or god forbid around £2k to £3k.

Just wanted to hear what people are doing to support themselves. 

You would probably find those who can afford a £2k mortgage can afford £3k. You live to your means, so those on higher incomes probably have more places to cut back than those on lower incomes.

Someone earning well might go to one car instead of 2, going from a BMW to a VW, switching from Waitrose to Aldi....
Someone who already has one car which is 6-7 years old and already shops at aldi has nowhere near as many places to cut back. 

ispookie666

I managed to secure 5 year fix for 3.34 starting when my current 1.54% runs out in december, that's a £270 increase.  I have been overpaying my mortgage and annoyed that I'll have to scrimp in other places to account for the £270 shortfall. 

My first mortgage rate may moons ago was 5.14, it was unpleasant. You could hardly see a dent in the capital, nearly 1000 in interest to the bank 

Cheesy77

Partner likely going back to work full time, we still have until early 2024 on a reasonable fix but if rates are over 6% when we come off that then that'll have to be the first step. Mortgage is based on her part time wage so we are lucky from that perspective to have a little wiggle room.

Second child will have started school by then too saving on childcare costs. 

Really feel for families who are having to deal with maternity leave pay, or paying the crazy nursery fees/single income on top of all this. 

At least we are out the other side of that and have benefitted from low rates throughout the part time working and nursery fees.

For anyone that hasn't, I really hope you manage to find a way through this period 

K_S

EnterUserName said:

@K_S Interesting, what typically are the criteria these days for switching to IO?

Do you normally have to put an equivalent amount into a savings vehicle? I'm not sure how that would help if you are strapped for cash - or does the maths work as you are only "saving" for the capital and have no interest to pay?

To the OP, we are biding our time... Our only credible options this time next year, if rates go as predicted, would be to get a lodger or sell up!

@enterusername I might perhaps have given the wrong impression, the part-and-part and IO options are mostly for where clients want to increase the flexibility they have and increase their resilience to future adverse events such as one half of a couple losing their job, falling ill, etc. If a client came to me in genuine financial hardship, there's no way I'm advising them to remortgage to IO and in some cases I might not be able to advise them at all.

With IO, there are lot of different criteria which varies from lender to lender but generally speaking it's one or more of the following - low LTV, high income, minimum equity of x, minimum house value of x, acceptable repayment vehicle (differs from lender to lender but can include downsizing on retirement), etc. Generally speaking, the clients that I advise on IO are high income professionals in their 30s/40s living in expensive parts of the country taking out terms to 70.

dander

I hate the thought of people going on to interest only. It feels like such a gamble to reduce payments and stop paying off the debt. At least with extending the term people are still gradually paying the debt off. It scares me that people might be so focussed on cost they aren't thinking about securing their homes.

renegade1

My fix is coming to an end Nov-23 (which i might add is right at the time when interest rates are predicted to peak - lucky me lol) I'll also start making HTB interest payments at this time (doubly lucky me). Plan is to ride the tracker for a couple of years, overpaying as much as possible and then add the HTB loan to the mortgage when mortage interest rates  stabilise to around 3-4% (optimistic!).

Luckily the HTB interest rate is low. I hope they don't change the rules!

silvercar

dander said:

I hate the thought of people going on to interest only. It feels like such a gamble to reduce payments and stop paying off the debt. At least with extending the term people are still gradually paying the debt off. It scares me that people might be so focussed on cost they aren't thinking about securing their homes.

We’ve been on interest only from the very start, albeit now with an offset mortgage. If you are disciplined it can work for you. Effectively you are reducing the minimum payments that you have to make, so it helps through the tough times. In areas with high property prices it can be cheaper to have an IO mortgage than renting.

london21

Personally been mindful on what i spend on.

Looking to further upskill and go onto a higher paying role.

Keeping my savings in the bank will keep some emergency funds and invest the rest over time.