How are people actually coping with mortgage payments increasing?

chrisrawles

I've been looking at multiple scenarios based on 'predictions' and its pretty bleak my side.  I would consider ourselves to be comfortable at the moment,  don't have loads of debt or silly monthly car payments etc.  But we are facing £400 increase when our fixed rate comes to an end.

I'm in a good job that pays really well.  I also have the added bonus of walking to work so no car fuel costs.  My partner works from home running her own business.  Despite these benefits to keeping travel costs down,  we are going to really feel the increase.

I do feel the lenders are taking the P a little bit because they know people are desperate to fix a new deal ASAP.  Bit like the cost of fuel,  once you pay the higher price for a couple of weeks, the prices stays high for as long as possible.

She might need to get s part time job to help with the increase monthly payments.  

Being grown up is pants at times LOL

Sg28

When I bought my first house in 2013 I thought rates would be rising fairly soon and house prices would be dropping. (How wrong I was!) On the plus because of this we held off buying a couple of years and saved a 50% deposit and kept our mortgage relatively low and affordable. It just seemed silly to be to push yourself to the limits of affordability like many of my friends were doing. 

Children and a house move later and we are left with 135k left split over a 5 year fix ending sept 2023 and a 10 year fix ending 2029. 

5 year fix is 2.29% and 10 year 2.49%.

When the increase in the first fix ends it would be about £200 a month. Which would be annoying on top of everything else but affordable. 

Fortunately im in the position now to be able to pay the whole outstanding amount if I need to. So unless the situation changes I will clear the first part of the mortgage next year and offset the second part for the remaining 7 years with savings. 

Adsta

Like some have mentioned when you get a mortgage how far to you "test" your stretch in terms of repayments. When I got mine, I worked out if interest rates were to go to 7% I could still afford albeit have to cut back on some things. But then there's talks of 10%?! I think if it ever get's that high there will be a lot struggling. 

My fix ends Oct 23, so timing sucks. But all the panic of people moving because of the interest rate rises I couldn't change my mortgage without it costing a fair chunk and interest rates just jumped like mad. I decided in the end to not panic and enjoy the remaining year of "easy" payments, while putting a bit more into savings. 

I'll have to wait and see what happens next year and hope it doesn't rocket past 7% lol. A lot can change in a year..... as the last few years have shown. Hopefully it's not dramatically worse.     

Getting_greyer

I'm just praying for daily inflation to hit 500000% so I can pay the mortgage off with a weeks wages.

Scorpio33

Getting_greyer said:

I'm just praying for daily inflation to hit 500000% so I can pay the mortgage off with a weeks wages.

You mean your pay goes up by that amount? Just because inflation increases, it doesn't automatically translate to a wage increase.

silvercar

mi-key said:

It may help to view the mortgage over the whole term, rather than just short periods. If you have paid of 5 years when the interest rates were low, and now have to pay a few years with them higher, it all averages out over time. Yes things may be tight for a lot of people, but the important thing is to keep a roof over your head, and hopefully not fall off the property ladder.

Circumstances can change for any number of reasons ( unemployment, health etc.. ) and not many people these days are secure enough to be able to not worry. Always look at options such as downsizing, you may not love the house you are in, but who knows what will change in 5 years time, and you may be in a position to buy somewhere nicer again.

As for people thinking house prices will crash, I don't think this will happen. At worst I think they will stagnate, or grow at a small amount ( in the area I live in, they have been going up nearly 20% a year, but that was after maybe 7 years of very little increase ). Prices will never drop anymore as there is too much demand for housing 

To your first paragraph, it helps if interest rates are low before they are high, that way you can overpay your mortgage, so that you have lower repayments when interest rates are high.

As to your last sentence, if there is no one that can afford current prices then demand will fall and so will prices. Mainly because there will be some that are forced to sell and can't afford to ride it out. Also, in the flat (as in apartments, not flat=level) market the cladding issue should be sorted for many people in the coming year or so and that will mean a lot more sellers desperate to sell will at last be able to do so.

silvercar

In 2002 we took out what we thought was  a 5% 5 yr fix on Interest Only. After 5yrs, we realised it was a 5% fix followed by a 0.75+ base rate for the remainder of the term. In 2007 interest rates were around 4-4.5% so it didn't make much difference. Then interest rates dropped and continued dropping. We continued to pay the same amount, though putting the difference in the offset account that came with the mortgage. If we had diligently not touched the savings until now and used it to reduce our mortgage balance, our mortgage would now be less than half it was originally. 

ElwoodBlues

Sistergold said:

Ballymoney said:

Genuine question…How many people who are going to really struggle with the higher interest rates actually paid attention to the “If interest rates hit 6% your repayments would be £xxxx per month” line in their mortgage offers on their current low % fixes?

Did you read it and automatically assume those rates will never actually happen? 

I’ll hold my hands up and say that I paid next to zero notice of the warning of higher rates but I’m intrigued to know other peoples experiences.

I am also guilty of this. Read that it could increase to x% will you manage? Your mortgage will be at risk in my head it was blah blah blah. Now it’s all real! One thing I did do though is start overpaying to start reducing from the £487k mortgage I got one year into the mortgage. This was 2019, I must say it’s biting hard now the rate rises as I always take a tracker mortgage. My mortgage is a discounted tracker ending May 2023 at which point I will not fix at whatever high rate will be going. I will take another discounted tracker and see how things go. Mortgage is a long term commitment and can not afford to panic into a high fixed rate. Generally overpay by a £1000 a month  although I reduce some months due to projects, so the rate rise have still not gone over my original monthly quote as it has been going down due to overpayments. I am still feeling the pinch though I must say. 

Times are really hard and getting harder. We all need some luck. 

When I took out my mortgage 6 years ago the 2yr fix was 1.4% and the SVR was 3.50% the paperwork gave an example of what I'd have to pay if interest rates went to up 11%. The monthly repayment would triple at that rate. I could still afford that, but at that rate the monthly interest (on the full value of the property) would be 3x what the monthly rent was. Obviously I took the 11% example with a large pinch of salt (as my broker also laughed at it - "that'll never happen"), on the basis that if rates got that high there would be a lot of people in a lot more of a financial mire than me.

I also took out the mortgage with the longest term available - 33 years, taking me to 70. But I did that on the basis that I could afford to overpay considerably (which I have done so far), and current projections would put me mortgage free in about 10-12 years from now.

Instead I'm looking at the monthly repayment increasing to swallow my rate of overpayment, and extend the term back up to the full 33 years. So while I'll be able to afford the monthly payments, the extra expense will make a huge impact on long term finances, and that affect my kids far more than me. It'll prevent me from having the extension built that I need to house my kids in comfort, and I'll struggle to assist funding them through higher education.

What irks me most is that it's come down to pot luck as to who is getting a good rate over the next few years - purely down to when borrower's existing fixes ended. I'm on a fixed rate that's low by current standards, but high by historic ones (2.5%). I looked at re mortgaging last year, when my current lender was advertising rates of 0.85% for 7 year fix. Decided not to as I'd have had to pay an ERC of £3k, which now looks like small change compared what it's going to cost me soon - an extra £5000 a year in interest at todays rates.

Some people are going to end up homeless/repossessed, while others, who might have been less prudent/stretched their borrowing more, are barely going to be affected due to the timing of their fixed rate.

mi-key

ElwoodBlues Very true! A lot is down to timing and blind luck. My current fix was due up in March this year ( had been on 5 year fix at 2.14% ). I could have got a cheaper lower rate for a short term fix, but decided to go with a 10 year fix at 2% ( which will take me roughly to the end of the mortgage ).

I am very glad I did as things have turned out, even though I may end up paying more over the 10 years depending on what happens, at least I know my repayments are set for the future. 

I do feel very sorry for those who have stretched to buy their first home and only had a 2 year initial fixed rate as they are going to really struggle

grandadgolfer

Think about us oldies who were paying 14% back in the late 80s and todays increases don't seem that bad