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

ElwoodBlues

Newbie_John said:

Linton said:

Newbie_John said:

To everyone bringing data back from 70s.. worth also comparing average house price with average salaries - in 70s/80s it was 4x, now it's nearly 10x - so referring to data back in time it's not really relevant:
 

The comparisons suggested in this graph are not really meaningful.  100 years ago houses were generally only bought by th erichest people, the majority of people rented or simply continued to live in the family home. In 1914 only 15% of people owned their own home ref.   So people on the average wage would not have bought a house anyway.

Also first time buyers with no equity who would be most concerned about price/income ratios cant expect to be able to  buy "average" priced houses.

I only wanted to refer to 70s/80s as this was brought back here couple of time when people said that mortgages are finally at normal rate as they always used to be around 8%. 
They may have been like that back then, but also an average house would cost 4x the average salary - so if I could buy an average house now for the price of £140k instead of £300k then I wouldn't mind paying 8% interest rate.

Ignoring affordability for a moment:

Borrow £140k for 25 yrs at 8% rate and it costs 410k in interest, 550k in total.
Borrow £300k for 25 yrs at 4% rate and it costs 250k in interest, 550k in total.

Just an observation. Of course lower mortgage rates also mean greater house price inflation, as we've seen over the last 30 years. So your 300k house might be worth 1.2m 25 years from now, but your 140k house (with 8% rates) might only worth 200k in 25 years. Purely speculative figures, could be way out, but you get the idea.

dunstonh

I would hedge my bets confidentially that the majority of people struggling with a mortgage are not paying out £1055+ on discretional spending.

I have seen it time and again in the past when dealing with people claiming money shortages.

In the majority of cases, it has been discretionary spending that has got them in trouble.    When doing home visits, they would have massive widescreen TVs, rows of Blu-rays or xbox games, smokers, overseas holidays, expensive phones and contracts and every subscription going etc.

It is important to not belittle or not feel sympathy with those that are on or below the breadline who genuinely do deserve support.  However, there are plenty of people who put themselves in that position by overspending and pushing it to the limits.

Older generations didn't cut back on £500 pcm car payments or Sky TV or Sim only phone deals.

They would cut back on other things and has less discretionary spend to use to do that.   People held onto cars much longer back then.  White goods were far more expensive and would not be replaced as frequently.  Things would be repaired and live extended.    TV and things that cost no money would be used more for recreation.

Be honest or be quiet.

Be honest and realistic.

We need to be more compassionate to people who are bearing the brunt of this.

Wrapping them up in cotton wool and not being honest with them does no favours.  That doesn't pay the mortgage.

as it stands, the first post was a bit of a rant (the tone of it).    The responses in a thread often mimic the tone of the OP.   If the OP had actually posted the detail and it was clear that there were real issues, then the responses would be different.

Ryan_Holden

It doesn't matter what you have seen time and time again, it is irrelevant in context of this conversation until the OP has confirmed it.

Until then it remains nothing but judgemental, presumptuous speculation from your and a myriad of other users. And tbh, this place is better than that. 

We are better people than that.

michaels

Ryan_Holden said:

It doesn't matter what you have seen time and time again, it is irrelevant in context of this conversation until the OP has confirmed it.

Until then it remains nothing but judgemental, presumptuous speculation from your and a myriad of other users. And tbh, this place is better than that. 

We are better people than that.

So with nothing specific to go on, I posted a generic example of what 6% mortgage rates might mean given max normal borrowing (5x joint income) for a low/average income household showing that it was tight and unpleasant but not 'unaffordable' with cutbacks elsewhere.  I didn't even include extending the term or switching to interest only options.

The OP said not affordable, generic numbers seem to suggest that it is still (currently) affordable.

Ryan_Holden

And you also suggested they drop a grands worth of discretionary spending that you've no idea they actually have. 

michaels

Ryan_Holden said:

And you also suggested they drop a grands worth of discretionary spending that you've no idea they actually have. 

First I looked at discretionary spending, that was (rightly) rejected as being without evidence so then I simply looked at post tax income and mortgage payments given a 5x joint income loan (which I believe is probably the typical max available) and worked out how much income would be left after paying a 6% mortgage rate and suggested that this should be affordable but not pleasant.

I also pointed out that I have a large family, an expensive mortgage and a lower income but manage to afford the unaffordable.

jimjames

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! 

Lots of replies but one thing that hasn't been posted is what 40% actually equates to. 40% of £200 will not be an unaffordable rise for many people, 40% of £2000 will be quite a different proposition.

bluelad1927

 I hope this isn't seen as condescending  but how do you get a low rate mortgage and not fix?

Am I being naive are these products not available to all? We moved at the same time and fixed for 10 yrs making the assumption that rates were pretty much as good as they'd ever be.and would only go one way.

The Key facts statement made it clear it would be unaffordable at a much greater interest rate

dunstonh

Ryan_Holden said:

It doesn't matter what you have seen time and time again, it is irrelevant in context of this conversation until the OP has confirmed it.

Until then it remains nothing but judgemental, presumptuous speculation from your and a myriad of other users. And tbh, this place is better than that. 

We are better people than that.

I think you forget that this is a discussion board.   Discussion is what we do here, and that means discussion is relevant.

You are also making presumptions and speculating as much as everyone else on this thread.  You are presuming that the OP is in a precarious situation, not at fault in any way, and has no means to cut back.  You may well be right but you could also be wrong.   Yet you are putting more value on your views and not considering the views of others.

Sarah1Mitty2

MeteredOut said:

Sarah1Mitty2 said:

Newbie_John said:

Linton said:

Newbie_John said:

To everyone bringing data back from 70s.. worth also comparing average house price with average salaries - in 70s/80s it was 4x, now it's nearly 10x - so referring to data back in time it's not really relevant:
 

The comparisons suggested in this graph are not really meaningful.  100 years ago houses were generally only bought by th erichest people, the majority of people rented or simply continued to live in the family home. In 1914 only 15% of people owned their own home ref.   So people on the average wage would not have bought a house anyway.

Also first time buyers with no equity who would be most concerned about price/income ratios cant expect to be able to  buy "average" priced houses.

I only wanted to refer to 70s/80s as this was brought back here couple of time when people said that mortgages are finally at normal rate as they always used to be around 8%. 
They may have been like that back then, but also an average house would cost 4x the average salary - so if I could buy an average house now for the price of £140k instead of £300k then I wouldn't mind paying 8% interest rate.

If mortgage rates go to 9 or 10% and stay there that is what you will get.

If mortgage rates go to 2-3% and stay there that is not what you will get.

(ie. anyone can pluck figures out the air and try to make a point on the back of the strawman)

My scenario is much more likely on the current data, we don`t need strawmen, average house at much lower price benefits ordinary working people as well.