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

silvercar

I live near London, the rental costs for FTBs or first renters mean that it is often cheaper to buy than rent, so saying people should have expected this leaves out of the equation that they had little choice, they have to live somewhere.  Also long term there is the feeling that you have to get on the housing ladder otherwise an increase in property prices could mean you have missed the boat. I accept that prices probably aren’t going to increase in the next couple of years, but trying to call the bottom of the market is tricky.

Ksw3

I did think rates would go up, not this quickly AND this high. Our mortgage broker said absolutely nothing about rates going up long term just get your forms in now because they are going up tomorrow and that we could borrow 85k more if we wanted (we didnt).

So many people in the generation above me said don't worry your mortgage will get cheaper or it will never be as hard as it is in the first few years that you start to believe it. It's said that it's hard getting on the ladder but rarely do we discuss how hard it can be to stay on. 

Ryan_Holden

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?

This is literally what I'm saying, the condescending tone is just not needed. You need to accept that some people didn't understand that the base rate could rise this much at all because they'd lived their entire adult life watching it stay at basically nothing. 

Not everyone has a keen interest in financial affairs. 

Altior

Ryan, the title of the thread is very much encouraging the tone of the responses that the OP is receiving in my view.

It appears that they are not accepting any personal responsibility. I should imagine that ought to include cutting their cloth accordingly. 

Nelliegrace

It is hard when the mortgage interest rate goes up, with negative equity, strikes, power cuts, high unemployment, pay freezes, when you can’t afford heating, and count the pennies for basic groceries. 
Try a mortgage interest rate of 17.4%. 

Longwalker

Ryan_Holden said:

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?

This is literally what I'm saying, the condescending tone is just not needed. You need to accept that some people didn't understand that the base rate could rise this much at all because they'd lived their entire adult life watching it stay at basically nothing. 

Not everyone has a keen interest in financial affairs. 

Surely though, with no interest at all, you start learning fast when it comes to borrowing so much money?

I do feel the pity of this generation of FTB's I do. An increase of 6% on hundreds of thousands has got to hurt

Im of the generation that bought in the mid 90's as rates started to fall, I think our mortgage was 11% or thereabouts but I saw my parents hang on by the skin of their teeth where rates got to their highest and I remember the repossessions making the news almost daily, the homelessness, the fall in house prices and the recession

Neither myself nor my husband are educated, secondary school education and thats it, and buying a house was scary as we really didnt have a financial clue between us, but we could work out percentages and we could see what had happened with rates the previous 20 years. So whilst banks were queuing up to hand us as much money as we wanted ( 110% mortgages available ) we stuck to borrowing what one full time wage could service. We bought a hovel and lived on a building site for years

But back then a hovel was 60k and ten a penny

So whilst it annoys me that this generation are clamouring for help, that they didnt know, whatever, I can at the same time have some compassion for them. I know I wouldn't want to have a mortgage this day and age 

Petriix

Unfortunately for many, the lack of affordability is exactly the point of increasing interest rates. That's how rate increases 'tackle inflation'; it's actually by design rather than being an unfortunate side effect.

Ryan_Holden

Nelliegrace said:

It is hard when the mortgage interest rate goes up, with negative equity, strikes, power cuts, high unemployment, pay freezes, when you can’t afford heating, and count the pennies for basic groceries. 
Try a mortgage interest rate of 17.4%. 

This is all well and true saying try a mortgage at 17.4% but it's immediately rebutted by 1, being atypical of the period and 2, where the relative value to salary was much lower making the affordability much better.

themanfromportobello

I agree with some on here. When ANY of us take out an mortgage there is an affordability test. Rate are not higher than you would have been flexed against. With the correct budgeting you should be able to afford it

This is a hard reality check for many, but it does mean that some (most?) will really need to batten down the hatches and prioritise living expenses accordingly. This may mean taking a 2nd job, getting a lodger, go out less often, cheaper brands, cheaper (no?) holidays etc etc.

It sounds harsh but we all need to realise that cheap money is a thing of the past. We have had a good ten years but seems we 'spent' more of the good times than we saved.

DullGreyGuy

fiish said:

Prior to last year's dramatic rate rises, interest rates have been low for nearly 20 years. 

For the first 5 years of that "nearly 20 years" the rates were commensurate to what they are now and it's only since late 2008 that rates plummeted. 

The average age of a first time buyer outside London is 33.4 (in London its older) which means in 2008 they were on average over 18 which is plenty old enough to have memory of the chaos that happened and things being out of the ordinary. Most people will have parents or friends that had parents and certainly I recall from that time (a little older than 18 and still a renter) people comparing their 1% mortgages to the 15% mortgages in the 80s.

Yes there will always be someone who never knew anyone that owned their own home, somehow by the time they are 19 have a deposit large enough to buy a home but despite their relative wealth somehow know nothing of how finances work or economic history but still brokers have always commented on interest rate increases.