How are people actually coping with mortgage payments increasing?

isadreamalie

An apposite Bruce Springsteen song which reminds us how dark things can become:

Well they closed down the auto plant in Mahwah late that month

Ralph went out lookin' for a job but he couldn't find none

He came home too drunk from mixin' Tanqueray and wine

He got a gun, shot a night clerk, now they call him Johnny 99 

Down in the part of town where when you hit a red light you don't stop

Johnny's wavin' his gun around and threatenin' to blow his top

When an off-duty cop snuck up on him from behind

Out in front of the Club Tip Top they slapped the cuffs on Johnny 99

Well the city supplied a public defender but the judge was Mean John Brown

He came into the courtroom and stared poor Johnny down

Well the evidence is clear, gonna let the sentence, son, fit the crime

Prison for ninety-eight and a year and we'll call it even Johnny 99

Fistfight broke out in the courtroom, they had to drag Johnny's girl away

His mama stood up and shouted, "Judge don't take my boy this way"

Well, son, you got any statement you'd like to make

Before the bailiff comes to forever take you away?

Now judge, judge I got debts no honest man could pay

The bank was holdin' my mortgage and takin' my house away

Now I ain't sayin' that make me an innocent man

But it was more 'n all this that put that gun in my hand

Well, your honor, I do believe I'd be better off dead

And if you can take a man's life for the thoughts that's in his head

Then won't you sit back in that chair and think it over just one more time

And let 'em shave off my hair and put me on that execution line (woo)

BikingBud

[Deleted User] said:

BikingBud said:

brownbagsFTB said:

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.

I think most people do understand. I was well aware of the interest on my 30 year mortgage but as I didn’t manage to save enough to buy alone until I was 39, if not then… when? Getting on the housing ladder is seen as critical for most people my age. We want assets by the time we retire and to not have to be beholden to landlords and pay a good proportion of what will likely be a very meagre pension in rent. Many people I know survived the 2008 housing crash and we will survive this. It’s better to be a homeowner (even if it it does involve a few years of struggle out of a 30 year term) than it is to be renting forever. People always have the option of overpayment when rates are low. 

And maybe that's the real issue, you consider getting on the housing ladder and getting assets to be the priory rather than just getting somewhere to live.

What exactly do you habe against someone living in a home AND also viewing it an asset.

It comes with an over bearing and unbreakable assumption that it will always increase in value. When clearly that is not the case.

Wanderingbear

I see us as fortunate to only have a small amount left - £35k over a 4yr term. Our 1.79 fixed rate is due to end beginning of Jan and lowest 2yr fix rate we can get with current lender is 6.14% increasing our monthly payment by £80 per month. The standard rate at the end of fixed rate is 5.99%. 

We will try and make a £4k overpayment before the end of Jan to get the balance down to below £30k so the increase is on as little as possible.

We know many families that have unfortunately maxed out after covid that will no doubt be massively impacted over coming months. 

brownbagsFTB

BikingBud said:

What exactly do you habe against someone living in a home AND also viewing it an asset.

It comes with an over bearing and unbreakable assumption that it will always increase in value. When clearly that is not the case.

When did I say that? You took my reasoning completely out of context. If I’m paying hundreds of thousands of pounds over a lifetime to live somewhere, I’d rather own an “asset” by the end of it (i.e. a mortgage free roof over my head) instead of paying rent for somewhere I don’t own (and paying someone else’s mortgage) until the day I die. I think that’s a pretty reasonable goal for most people and I don’t understand why you’d begrudge anyone for trying to buy. Are you a homeowner? 

sevenhills

fewcloudy said:

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.

The mini budget may have increased interest rates quicker.
I got a ten year fix, almost five years ago. If rates go sky high it may have been a wise choice, but I paid a higher rate for four years. My rate is 2.69%

theoretica

brownbagsFTB said:

BikingBud said:

What exactly do you habe against someone living in a home AND also viewing it an asset.

It comes with an over bearing and unbreakable assumption that it will always increase in value. When clearly that is not the case.

When did I say that? You took my reasoning completely out of context. If I’m paying hundreds of thousands of pounds over a lifetime to live somewhere, I’d rather own an “asset” by the end of it (i.e. a mortgage free roof over my head) instead of paying rent for somewhere I don’t own (and paying someone else’s mortgage) until the day I die. I think that’s a pretty reasonable goal for most people and I don’t understand why you’d begrudge anyone for trying to buy. Are you a homeowner? 

Exactly! I bought shortly before the 2008 property crash, but it didn't bother me as I still had the home to live in.  I now, thanks to overpaying while interest rates were low, feel secure despite interest rate rises and challenges in the rental market. 

Sistergold

BikingBud said:

[Deleted User] said:

BikingBud said:

brownbagsFTB said:

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.

I think most people do understand. I was well aware of the interest on my 30 year mortgage but as I didn’t manage to save enough to buy alone until I was 39, if not then… when? Getting on the housing ladder is seen as critical for most people my age. We want assets by the time we retire and to not have to be beholden to landlords and pay a good proportion of what will likely be a very meagre pension in rent. Many people I know survived the 2008 housing crash and we will survive this. It’s better to be a homeowner (even if it it does involve a few years of struggle out of a 30 year term) than it is to be renting forever. People always have the option of overpayment when rates are low. 

And maybe that's the real issue, you consider getting on the housing ladder and getting assets to be the priory rather than just getting somewhere to live.

What exactly do you habe against someone living in a home AND also viewing it an asset.

It comes with an over bearing and unbreakable assumption that it will always increase in value. When clearly that is not the case.

Why derail the thread to a debate of whether to buy or not? This thread is titled for those who decided that buying was their best option for reasons known to them. For those who buy it’s about paying for a place they live in with the hope of not paying at some point. Even if one buys at £30k and when they finish paying it’s valued at £15k it’s neither here nor there. Better we keep the thread on topic. 

EnterUserName

To those asking "how can you not afford the increase", like we are stupid. I'll give you our scenario for some light entertainment.

We bought our house 7 years ago when we were DINKs (dual income, no kids). It seemed sensible as repayments were quite a bit cheaper than the prevailing rent rate. Wind forward to now, we have 2 kids. Nursery fees pretty much outstrip any earnings potential for wifey. So I guess we are SITKs. Doesn't quite have the same ring to it.

Anyway, I've become a bit indifferent to it now, if mortgage rates rise to 8 - 10% when our fix runs out next year, we will have to sell up and start again somewhere else, maybe as renters. I take comfort in that unless house prices drop by 50%, then we won't risk negative equity.

I say this with a cheeky smile, everyone has a story, we're not all mindless thickos that purposely took on mortgages we couldn't afford

brownbagsFTB

@EnterUserName absolutely! Circumstances change. I bought on my own a year ago, I’m freelance and had a pretty good income at the time. I didn’t borrow to my max though (about 45K less thankfully) and in the past year work has been slower. My mortgage was 3.09% so not one of the really cheap sub 2% rates a lot of people are on but if rates rise to 6% my mortgage payments will rise from £850 per month to £1200. I can still afford it for a short time, if I’m clever about paying down other short term debts but that’s a huge jump and chunk of my income going to the mortgage and a problem that thousands of households across the country are facing. We’re not stupid or complacent for buying at lower interest rates, this market shift is unprecedented… even the banks were unprepared for such a steep rise, so quickly, so how could any of us have foreseen it?! I do still live in hope though that rates won’t stay high for long without government intervention in the form of a MIRAS or something (there are already mumblings about labour introducing a scheme if they takeover). 

EnterUserName

@brownbagsFTB MIRAS sounds interesting - not heard of that one before. Sorry to hear it, it sounds like we're in the same boat.

We, like you, could probably deal with it for a limited number of months before we became destitute. But if there's no end in sight, we'd have to sell up.