How are people actually coping with mortgage payments increasing?

SadieO

SuboJvR said:

Anyway… I’m putting some money away now with all this in mind, we are working all the overtime we can.  I’m just not entirely sure what to do with it as everything is so volatile, but I don’t need to decide just now.  On the one side the idea of overpaying to get the balance down appeals, on the other just putting the money aside to help if we need it in 2024 for a couple of years of higher interest rates in the hope it comes down a bit after that.

I don't even have a mortgage yet, we're in the process of buying our first house (and praying everything goes through as we've fixed at 3.6% and I don't think we'll see those sort of rates if we have to start again!) I'd like to overpay to get in the best position possible for when our fix ends (and just in general, to hopefully become mortgage free in less than the 25 year term).

My plan is to put half of whatever I have left at the end of each month into savings, and half into an overpayment. I think that's a good compromise. 

SuboJvR

SadieO said:

SuboJvR said:

Anyway… I’m putting some money away now with all this in mind, we are working all the overtime we can.  I’m just not entirely sure what to do with it as everything is so volatile, but I don’t need to decide just now.  On the one side the idea of overpaying to get the balance down appeals, on the other just putting the money aside to help if we need it in 2024 for a couple of years of higher interest rates in the hope it comes down a bit after that.

I don't even have a mortgage yet, we're in the process of buying our first house (and praying everything goes through as we've fixed at 3.6% and I don't think we'll see those sort of rates if we have to start again!) I'd like to overpay to get in the best position possible for when our fix ends (and just in general, to hopefully become mortgage free in less than the 25 year term).

My plan is to put half of whatever I have left at the end of each month into savings, and half into an overpayment. I think that's a good compromise. 

This sounds sensible indeed I suppose I am just worried about how bad things could get with interest rates by the time our fix ends. Reducing mortgage term means little if you can’t actually make the payments month to month, even if it is for a short period of time, as a house could be repossessed! I suppose I’m thinking about putting that extra safety buffer aside until we have a better idea of how things may look for us in 2024.   But as I say I don’t really need to decide just now, we can overpay up to 10% which I won’t be threatening so the money can sit in my bank for now rather than theirs…

themoomins

CLG2022 said:

We have £477k left on our mortgage, house worth £850k so approx 55% LTV. Monthly payment £1750. 26 yrs remaining. 
Current fix of 1.09% end in May 2023. ERC is £14k! This is with Santander. 

The follow on rate is 5.5% which would put our monthly payments up to £2835. +£1085. Now, this wouldn't be so bad except I am towards the end of maternity leave and nursery fees will now be £1200 a month also. I will be working full time in a stressful role for nothing basically. 

I don't know whether to try and secure a new deal now and add the ERC onto the mortgage or wait until the New Year? I feel at a loss quite honestly. 

I don't even think we can increase the term as my husband is 44 and me 39. 

It's going to be a tough few years I think. 

Yikes!   I would sell the house and buy something cheaper.  That's a huge mortgage.  I know people have high salaries but I couldn't sleep at night with half a million of debt even if I did earn well. 

Saying that, I am ultra conservative when it comes to mortgages (and any form of debt).  We were able to borrow over £400,000 but instead bought a £150k house with a 50% deposit from our house sale before that.  House is much smaller than I would like but it will be paid off in the next few years and has significantly increased in value (identical house next door sold for £220,000 unmodernised last year).  I often Rightmove dream houses that on paper I could 'afford' but I have to say that looking at the now 6% interest rates I am glad of my little cheap house.

I am not gloating though.  In the 2008 crash I was stuck with Northern Rock on a 6% interest rate and watched with envy whilst everyone else was enjoying sub 1% mortgage repayments.  I only finally got a low rate when buying this house 6 years ago.

CLG2022

themoomins said:

CLG2022 said:

We have £477k left on our mortgage, house worth £850k so approx 55% LTV. Monthly payment £1750. 26 yrs remaining. 
Current fix of 1.09% end in May 2023. ERC is £14k! This is with Santander. 

The follow on rate is 5.5% which would put our monthly payments up to £2835. +£1085. Now, this wouldn't be so bad except I am towards the end of maternity leave and nursery fees will now be £1200 a month also. I will be working full time in a stressful role for nothing basically. 

I don't know whether to try and secure a new deal now and add the ERC onto the mortgage or wait until the New Year? I feel at a loss quite honestly. 

I don't even think we can increase the term as my husband is 44 and me 39. 

It's going to be a tough few years I think. 

Yikes!   I would sell the house and buy something cheaper.  That's a huge mortgage.  I know people have high salaries but I couldn't sleep at night with half a million of debt even if I did earn well. 

Saying that, I am ultra conservative when it comes to mortgages (and any form of debt).  We were able to borrow over £400,000 but instead bought a £150k house with a 50% deposit from our house sale before that.  House is much smaller than I would like but it will be paid off in the next few years and has significantly increased in value (identical house next door sold for £220,000 unmodernised last year).  I often Rightmove dream houses that on paper I could 'afford' but I have to say that looking at the now 6% interest rates I am glad of my little cheap house.

I am not gloating though.  In the 2008 crash I was stuck with Northern Rock on a 6% interest rate and watched with envy whilst everyone else was enjoying sub 1% mortgage repayments.  I only finally got a low rate when buying this house 6 years ago.

It's definitely something we might consider, but we do live in an expensive area and the kids are settled at school. Between us we earn 170k so we can absorb it for now but with nursery as well it's definitely going to be a stretch!

Londoncheesecake

CLG2022 said:

We have £477k left on our mortgage, house worth £850k so approx 55% LTV. Monthly payment £1750. 26 yrs remaining. 
Current fix of 1.09% end in May 2023. ERC is £14k! This is with Santander. 

The follow on rate is 5.5% which would put our monthly payments up to £2835. +£1085. Now, this wouldn't be so bad except I am towards the end of maternity leave and nursery fees will now be £1200 a month also. I will be working full time in a stressful role for nothing basically. 

I don't know whether to try and secure a new deal now and add the ERC onto the mortgage or wait until the New Year? I feel at a loss quite honestly. 

I don't even think we can increase the term as my husband is 44 and me 39. 

It's going to be a tough few years I think. 

Similar situation here mortgage debt of £360k for a family home worth around £700k (London area where we have always lived as children and work) fixed rate mortgage 1.25% with Santander which ends July 2023. 

From what I have read we cannot remortgage with them until 4 months before due to high early repayment charges.
We are public sector workers (health and police) with very small pay rises so unless we can squeeze in a lodger (with no spare room)we may have to consider relocating or emigrating which is my current mindset right now.

superstylin

CLG2022 said:

We have £477k left on our mortgage, house worth £850k so approx 55% LTV. Monthly payment £1750. 26 yrs remaining. 
Current fix of 1.09% end in May 2023. ERC is £14k! This is with Santander. 

The follow on rate is 5.5% which would put our monthly payments up to £2835. +£1085. Now, this wouldn't be so bad except I am towards the end of maternity leave and nursery fees will now be £1200 a month also. I will be working full time in a stressful role for nothing basically. 

I don't know whether to try and secure a new deal now and add the ERC onto the mortgage or wait until the New Year? I feel at a loss quite honestly. 

I don't even think we can increase the term as my husband is 44 and me 39. 

It's going to be a tough few years I think. 

Do you know how your ERC is calculated? I believe some banks have fixed sums throughout the term of the fix while others reduce the closer you get to the fix end date. 

I ask because my provider is HSBC and the ERC is reduced daily toward the end of the term. I too am on a fix ending in May (2.14%) but I have been able to secure an offer from HSBC of 5.14 as an existing customer 7 months early. I've been able to do this because I have increased the term of the mortgage which means it is essentially a new mortgage application and I have been able to put it on hold for 6 months. This means my ERC will be probably £80 approx at the most by the draw down date. The mortgage advisor told me it doesn't matter how how long you extended the term for, even a year extension would get you the same option. 

Obviously if your ERC doesn't reduce then this isn't an option for you. 

themoomins

I'm with Santander too and all fixed rates carry a fixed 5% ERC until the end of the term, it doesn't taper like with other lenders.

propertyhunter

CLG2022 said:

We have £477k left on our mortgage, house worth £850k so approx 55% LTV. Monthly payment £1750. 26 yrs remaining. 
Current fix of 1.09% end in May 2023. ERC is £14k! This is with Santander. 

The follow on rate is 5.5% which would put our monthly payments up to £2835. +£1085. Now, this wouldn't be so bad except I am towards the end of maternity leave and nursery fees will now be £1200 a month also. I will be working full time in a stressful role for nothing basically. 

I don't know whether to try and secure a new deal now and add the ERC onto the mortgage or wait until the New Year? I feel at a loss quite honestly. 

I don't even think we can increase the term as my husband is 44 and me 39. 

It's going to be a tough few years I think. 

There's a lot of Londoners I know in this position - the amount of debt isn't unheard of, but you have decent equity at least. We're in a similar position, but luckily fixed at 1.44% until 2027. We've had to make dramatic plans to build up 150k over 5 years in cash and use that to reduce the mortgage. We'll still be able to have discretionary spending but we're watching the pennies. 

superstylin

themoomins said:

I'm with Santander too and all fixed rates carry a fixed 5% ERC until the end of the term, it doesn't taper like with other lenders.

Thanks @themoomins

@CLG2022 if I were you I'd speak with a broker for advice. I believe the only way you can get a 6 month hold is to make a new application, either with your own provider (so you increase the loan amount or term rather than a simple rate switch) or remortgage with another bank. I was told by a broker that most new applications are taking a month to get to offer, that would mean you could get 7 months until draw down with the hold added so potentially you could apply at the end of this month and outlast the ERC. 

wobjelly

CLG2022 said:

We have £477k left on our mortgage, house worth £850k so approx 55% LTV. Monthly payment £1750. 26 yrs remaining. 
Current fix of 1.09% end in May 2023. ERC is £14k! This is with Santander. 

The follow on rate is 5.5% which would put our monthly payments up to £2835. +£1085. Now, this wouldn't be so bad except I am towards the end of maternity leave and nursery fees will now be £1200 a month also. I will be working full time in a stressful role for nothing basically. 

I don't know whether to try and secure a new deal now and add the ERC onto the mortgage or wait until the New Year? I feel at a loss quite honestly. 

I don't even think we can increase the term as my husband is 44 and me 39. 

It's going to be a tough few years I think. 

  We have £710k mortgage with 60% LTV. Currently on fixed 1.3% for 28yrs remaining. Our mortgage per month is £1044 as majority of our mortgage is interest only. With 6% mortgage interest our monthly payment will be £3000. A massive increase. Beyond 6% it won’t make any economic sense for us to keep paying the mortgage interest. We should rather sell the house and rent a house at £2000-£2500 per month or something! We are thinking of sending our kids to private schools but now, we have no choice but sending them to states.

We plan to do early repayment but max10% of the debt.. we don’t have that much of saving to repay more than that.