How are people actually coping with mortgage payments increasing?

simon_or

RelievedSheff 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.

It does genuinely befuddle me how some people are already saying they are struggling when rates have not risen by that much really and with the cost of living only going one way for the foreseeable a lot more people look set to be in the same situation 🤔

It does genuinely befuddle me how you think the mortgage rate rises in the past 6-9 months qualifies as "not risen too much" 🤔

As I said before, people's circumstances range across a very wide spectrum on which your personal circumstances are merely one point somewhere along that spectrum. I'm surprised that you're struggling to comprehend that some people on that spectrum might be affected differently to others when rates rise that much that fast.

TheGame21

Cheesy77 said:

TheGame21 said:

Our 5 year fix expires in January. We had a mortgage product lined up 3 months ago however for one reason or another we were unable to complete the application and then it was pulled when the Government announced their budget. That would have pushed our monthly payments up around £250. The best 5 year fix we have been offered now, pushes our payments up £550 a month. We have a mortgage of £295k remaining. I am so angry at the Government and what they have done. This is a direct cause of their actions. It's disgraceful. We have 2 young kids so will need to cut back to bare minimums to survive. 

Sorry to hear this. I hope you find a way to manage this period. 

It's pretty scandalous that a tiny proportion of the population can select a new PM, and one who then completely changes the economic policy with no mandate. 

Interest rates were on the rise but they've made it all happen much quicker by spooking the markets. 
 

Thank you, I agree it's disgraceful the effect a decision like that which was reckless has had on people's lives. There's such a massive jump in rates now. I'm glad Labour has highlighted it but not sure what can be done. 

TheGame21

RelievedSheff 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.

Our previous two mortgages have been at much higher rates than we are currently fixed at so we took a lot of notice of what our repayments would be at higher rates.

We knew full well that rates would not stay so low.

It does genuinely befuddle me how some people are already saying they are struggling when rates have not risen by that much really and with the cost of living only going one way for the foreseeable a lot more people look set to be in the same situation 🤔

I'm baffled how you are getting to this point where 2 year fixes are over 6% and the cheapest 5 year fix is now over 5%. Our last mortgage was at 3.19%. Of course interest rates were going to rise and people could have prepared for that by locking in earlier when rates were raised by the Bank of England but because of the Government, the jump in rates on mortgages has been significant with people facing massive rises.  My own is at £550. Even that mortgage offer which I locked into has now been taken off the market and rates have gone up still. 

Bluebell1000

We'll be ok for a little while but if the interest only mortgage on our BTL jumps too much we may have to reconsider what we do with it. At the moment it's just over 2% interest. If that triples to 6% the house will be costing us more than we make in rent, which means either the rent goes up or we have to sell. Still, just over 2 years left on our mortgage so fingers crossed things settle down by then. We'll see what we can save in the meantime to try and reduce the balance a bit. 

Troy_af

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 don't think that people totally ignore these warnings of potential interest rates when they take out the mortgage. But they are definitely glossed over and I totally understand that this is at your own risk.

However, what exactly are people supposed to do here? If the current rates are 6% then what is the upper limit that the lenders are now warning against? 10% maybe?

Right, so some people here are advising that you should stress test your affordability to this amount and not take out the mortgage in the first place unless you can afford this worst case scenario. I agree to some extent, but this for me is where the numbers don’t add up.

If I was to take out a mortgage where I was safe even assuming a 10% interest rate then I would be borrowing around twice my salary. Any more than that and I would be at risk. Maybe this is the amount that I should be looking to borrow? But why are brokers and lenders saying 3 to 4, or even 5 times your salary is actually the norm?

Maybe this is why people are finding themselves in this situation, the banks were lending too much in the first place? The average Joe is no financial expert. When I bought my first property, I’ll admit I totally relied on the lender, my broker and my solicitor to tell me what amount was affordable/sensible. I also recall my broker specifically saying to not worry about the “if rates rise then your payment would be this" figure, as this was just a worst case/extremely unlikely scenario.

I’m not saying take no responsibility whatsoever, but I do disagree with the those taking the line of “oh well, you should have thought about this when you took out the mortgage in the first place”.

jj_43

I never got into the habit of spending every single penny that I earned so haven't noticed. Salary increase next year will help catch up and rates don’t peak for long so not that fussed. 

[Deleted User]

I feel in a race against time until Sept 2025 when the 5 year rate at 1.46% ends. We really dont waste money or live extravagantly. House is large but modest location and price. We could have borrowed a lot more. In sept 20 mortgages were 325000. Looking to demolish this down to circa150k range by the end of the 5 year term.

Troy_af

What shocks me the most looking at the numbers, is how little of the loan is actually being paid off over the first 5 years on these rates. Especially for those taking out 30+ year terms.

Over 5 years I’m looking at paying around 66k. 55k of this is interest. 🤔

fewcloudy

I’ve said it before and I’ll say it again.

In a successful effort to facilitate financial business/markets, the mantra from the BOE for a good number of years now has been, yes, interest rates will eventually rise from their all time historic low, but when they do it will be a slow and steady rise over a number of years.

They most certainly did NOT mean from 0.25% to 2.25% in less that a year.

Despite what some on here say about the BOE losing the plot, I feel their slow/steady plan was exactly what was required to get interest rates back to a more sensible level, and unfortunately it has been blown out of the water by some mad Tory economic plans.

Their hand has been forced, to save the value of the pound and our pensions! We are living through tumultuous times and I think there is much more drama to come.

BikingBud

Troy_af 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 don't think that people totally ignore these warnings of potential interest rates when they take out the mortgage. But they are definitely glossed over and I totally understand that this is at your own risk.

However, what exactly are people supposed to do here? If the current rates are 6% then what is the upper limit that the lenders are now warning against? 10% maybe?

Right, so some people here are advising that you should stress test your affordability to this amount and not take out the mortgage in the first place unless you can afford this worst case scenario. I agree to some extent, but this for me is where the numbers don’t add up.

If I was to take out a mortgage where I was safe even assuming a 10% interest rate then I would be borrowing around twice my salary. Any more than that and I would be at risk. Maybe this is the amount that I should be looking to borrow? But why are brokers and lenders saying 3 to 4, or even 5 times your salary is actually the norm?

Maybe this is why people are finding themselves in this situation, the banks were lending too much in the first place? The average Joe is no financial expert. When I bought my first property, I’ll admit I totally relied on the lender, my broker and my solicitor to tell me what amount was affordable/sensible. I also recall my broker specifically saying to not worry about the “if rates rise then your payment would be this" figure, as this was just a worst case/extremely unlikely scenario.

I’m not saying take no responsibility whatsoever, but I do disagree with the those taking the line of “oh well, you should have thought about this when you took out the mortgage in the first place”.

Because we've been hoodwinked into believing that high house prices are a good thing and for some reason people believe that. 

If people really understood total amount repaid and how much more it costs to pay a mortgage off over 35 years v 25 years then the situation may have been different.

For too many it is too late, they have sold their soul.