How are we supposed to afford an 40% increase in mortgage payments...this can't go on!

fiish

Prior to last year's dramatic rate rises, interest rates have been low for nearly 20 years. From the BoE's rate history, the base rate went below 2% after 2008, and did not rise above 2% again until 2022. An 18 year old in the UK today will never have seen a BoE rate above 2% in their entire schooling life.

While it is true that there was only one expected direction of travel in the very long term, given how long interest rates stayed down, I can totally understand how people might expect rates to remain low, simply because they had for so very long.

user1977

lojo1000 said:

Ryan_Holden said:

not everyone is as financially astute as they should be.

It has nothing to do with finance. All you need do is appreciate that a number can go up as well as down. Does that really require a financial mindset?

And improbable that that wasn't spelled out by someone (or possibly several people) during the course of a mortgage application and purchase. 

lojo1000

fiish said:

Prior to last year's dramatic rate rises, interest rates have been low for nearly 20 years. From the BoE's rate history, the base rate went below 2% after 2008, and did not rise above 2% again until 2022. An 18 year old in the UK today will never have seen a BoE rate above 2% in their entire schooling life.

While it is true that there was only one expected direction of travel in the very long term, given how long interest rates stayed down, I can totally understand how people might expect rates to remain low, simply because they had for so very long.

And the mortgage term of 25 years, if not 35 years, was not giving a clue as to how far back to look at the history of rates?

Newbie_John

How? None of them are easy but: some ideas:
a) make savings elsewhere, sell car start cycling etc.
b) rent a room - tax free to £7500 a year
c) sell and buy something else cheaper
d) earn more - extra job on the weekend?
e) remortgage to longer term
f) save now while you can
g) stop paying pensions

Sarah1Mitty2

Ryan_Holden said:

Everyone saying things like "what did the OP expect when things returned to normal" seems to forget that not everyone in the country paid attention to or took interest in the base interest rate, especially when it was so low and static for probably most of a lot of new buyer's adult lives.

Show a little empathy by realising that not everyone is as financially astute as they should be.

Rjhsteel, get a lodger. It will suck to share your home but you can earn up to £7500 from lodger rent (called a licence fee) and not have to pay any tax on it. Spareroom.co.uk is a good source for lodgers. Then, in a couple of years of giving up a bit of space the world may be more settled.

Yes, this is a biggie, many people will have absolutely no clue as to what is happening, but many of that generation will have been priced out by the silly lending anyway so may have dodged some deep financial pain by accident so to speak? The lodger idea is good, as landlords try to cover their debts there will be more and more people handing the keys back on rental flats and looking to downsize.

Sarah1Mitty2

Rjhsteel said:

When we bought our new home in May 2022, the mortgage rate was 1.44%. With the mortgage rate atm we will be paying close to 40% more a month! 

How the hell is that affordable? Do they want people to hand back their homes? 

They hope that most people will continue to pay their mortgage debt by cutting back in the real economy, this will help towards getting inflation down, they are not going to sacrifice the currency and the wider economy to bail out mortgage holders who are only a small part of the wider pie.

Sarah1Mitty2

Slightly harsh, the thing to do is start making a list of cutbacks that can be acted on straight away, and keep up to date with the government ideas on payment holidays or whatever they are talking about (I don`t think the banks are legally required to follow this guidance though)

silvercar

coypondboy said:

Anyone who bought a flat under help to buy or shared ownership in London and other city centres over past 7 yrs unlikely to have made any money and mat have fallen in price what will happen when they come to re-mortgage if don't meet the affordability criteria and end up on lenders SVR which could be 9% next year?

The lenders have agreed with the government on some measure of forebearance, so there should be some help:

https://blog.moneysavingexpert.com/2023/6/martin-lewis--the-new-mortgage--forbearance-rules---how-big-a-ch

michaels

Until recently mortgages were affordability tested to current rate plus 3% so most should have some headroom for rates up to about 5% by default.

Most lenders will allow remortgage onto one of their products without new affordability checks so unless we see lenders fail and people move to 'legacy' lenders who do not have new products then we should not see the 'svr' prisoners issue.

Our IO will go from 1.94% to 4.5% in October (rate locked in the day a remortgage became available at the end of May) increasing the monthly from 490 to 1125.  We will have to cope.

QrizB

lojo1000 said:

Rjhsteel said:

When we bought our new home in May 2022, the mortgage rate was 1.44%. With the mortgage rate atm we will be paying close to 40% more a month!
How the hell is that affordable? Do they want people to hand back their homes?

I don't understand that in little over 1 year there are people who cannot afford their mortgage.
You have not indicated that your personal circumstances have changed so what the hell were the banks doing when they extended these loans?

A year ago, the OP had a short thread:

Rjhsteel said:

Going through L&C and after applying online, we have had a mortgage agreed in principle for the amount required for a move to a new home.
But after briefing checking a view main banking sites like Barclays and Natwest, the amount it suggested we could borrow, was a lot lower than the agreed amount with L&C.
Which has made be a bit worried.

Maybe those worries were well-founded?