Remortgage woes

[Beebo]

And what would you rather have - no home or an economy temporarily in recession?

Do you want ideas re how to get through or are you just looking for renewal experiences?

Are any ideas in my post workable for you?

If not, they may be useful to other members although I will happily delete the post if you wish.

Your suggestions are all very useful on a micro basis for an individual home owner looking to cut back to afford their mortgage.
But I was just pointing out that on a macro basis it will suck the life out of economy if millions of households pull up the drawbridge and stop spending.

 

[Bonefish Blues]

Your suggestions are all very useful on a micro basis for an individual home owner looking to cut back to afford their mortgage.
But I was just pointing out that on a macro basis it will suck the life out of economy if millions of households pull up the drawbridge and stop spending.

The Bank of England is independent, of course, and as such insulated from political interference.

A senior figure who may on occasion visit a large House in Westminster every so often with a battered case was indicating, in terms, that it is a price that must be paid in order to conquer inflation.

We need to suck it up, therefore.

 

[SpokeyDokey]

Your suggestions are all very useful on a micro basis for an individual home owner looking to cut back to afford their mortgage.
But I was just pointing out that on a macro basis it will suck the life out of economy if millions of households pull up the drawbridge and stop spending.

I don't see any alternative to many households coping tbh and I doubt many will look at the bigger picture when they are up against it.

Anyway, we are at risk of turning this into a debate so I will stop here.

All the best and I hope you can keep your head above water.

 

[Jameshow]

The Bank of England is independent, of course, and as such insulated from political interference.

A senior figure who may on occasion visit a large House in Westminster every so often with a battered case was indicating, in terms, that it is a price that must be paid in order to conquer inflation.

We need to suck it up, therefore.

It does seem a stupid mechanism to put up interest rates just as people are feeling the pain of inflation.

Inflation is already hurting people's purchasing power why double it. The 2-3oc inflation target is ridiculous when external issues like war in Ukraine etc.

 

[Beebo]

It does seem a stupid mechanism to put up interest rates just as people are feeling the pain of inflation.

Inflation is already hurting people's purchasing power why double it. The 2-3oc inflation target is ridiculous when external issues like war in Ukraine etc.

It’s also pretty pointless when most people are on fixed rate mortgages which may not need renewing for years, so it has zero impact unless you are due to renew soon.
If you were lucky enough to get a 5 year fixed just before Truss was PM you should be well insulated from all this.

 

[Bonefish Blues]

It does seem a stupid mechanism to put up interest rates just as people are feeling the pain of inflation.

Inflation is already hurting people's purchasing power why double it. The 2-3oc inflation target is ridiculous when external issues like war in Ukraine etc.

Compare and contrast with the rather more sensible US approach to mortgages which largely avoids the double whammy we are experiencing because of the short-termism inherent in our system.

 

[Bonefish Blues]

It’s also pretty pointless when most people are on fixed rate mortgages which may not need renewing for years, so it has zero impact unless you are due to renew soon.
If you were lucky enough to get a 5 year fixed just before Truss was PM you should be well insulated from all this.

But by definition many are coming to the end of mortgage fixes over what is likely to be what, 3 or more years of much elevated rates, and so the effect is very significant. We had taken low rates for granted as a society and now the fiscal chickens (great band) are coming home to roost. In the USA 20-30 year loans are the default. That's an enormous difference

 

[bonzobanana]

I did a little calculation out just to see what effects it could have on people as it was on the news that millions of home owners are coming to the end of their fixed deal and may struggle to get a fixed deal that isn't significantly over the variable rate and I did a calculation of someone with £200k left to pay over 22 years and did the interest rate at 0.5% and 5%, the 0.5% was about £900 a month just under but the 5% rate was about £2k a month. I'm no expert and may have got this wrong but its a staggering increase for someone who is only a few years into their mortgage.

A huge number of people rent homes from landlords who have mortgages on the property and their mortgage costs could jump hugely which surely would have a knock of effect to rents too.

I can see house prices dropping quite dramatically and many facing negative equity.

 

[Jameshow]

It’s also pretty pointless when most people are on fixed rate mortgages which may not need renewing for years, so it has zero impact unless you are due to renew soon.
If you were lucky enough to get a 5 year fixed just before Truss was PM you should be well insulated from all this.

Sure the same number if people remortgage each month? Sometimes the media make sound like half the country is remorgaging at the same time!🤣 Must peak late spring when housing buying peaks?

We fixed a few years ago 5yrs I hope!

 

[Bonefish Blues]

Sure the same number if people remortgage each month? Sometimes the media make sound like half the country is remorgaging at the same time!🤣 Must peak late spring when housing buying peaks?

We fixed a few years ago 5yrs I hope!

That's not how it works

ONS has done the numbers for the first half of 2023: 600,000+ renewals. Extract below.

In the first quarter of this year (Jan to Mar 2023), 353,000 fixed rate mortgages will have to be renewed. Our calculations, based on Bank of England (BoE) transactions data, suggest that the number of fixed rate mortgage deals coming to an end in 2023 will peak in Quarter 2 (Apr to June) 2023 at 371,000.

With interest rates continuing high for years, not months to come, this is very significant.

 

[Jameshow]

That's not how it works

ONS has done the numbers for the first half of 2023: 600,000+ renewals. Extract below.

In the first quarter of this year (Jan to Mar 2023), 353,000 fixed rate mortgages will have to be renewed. Our calculations, based on Bank of England (BoE) transactions data, suggest that the number of fixed rate mortgage deals coming to an end in 2023 will peak in Quarter 2 (Apr to June) 2023 at 371,000.

With interest rates continuing high for years, not months to come, this is very significant.

Why is that a different from what I said? Q2 will be higher than Q1 and I expect Q3 and 4.

353 + 371 = 724k

 

[Bonefish Blues]

Why is that a different from what I said? Q2 will be higher than Q1 and I expect Q3 and 4.

353 + 371 = 724k

My apologies if we're in violent agreement! I make it about 1.4m re-fixes estimated in 2023. It's frustrating to see the impact of this being underplayed

Source data here
https://www.ons.gov.uk/peoplepopula... the first quarter of,will have to be renewed.

 

[Jameshow]

My apologies if we're in violent agreement! I make it about 1.4m re-fixes estimated in 2023. It's frustrating to see the impact of this being underplayed

Source data here
https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/howincreasesinhousingcostsimpacthouseholds/2023-01-09#:~:text=In the first quarter of,will have to be renewed.

Agreed the jump from 2 to 6% will be a shock to many.

 

[gzoom]

Agreed the jump from 2 to 6% will be a shock to many.

Though 6% was 'normal' when I got on the property ladder in 2008, so for me that was/is the true affordability figure.

The last decade has been unbelievable for cheap borrowing, it was never going to last but it enabled us to skip many runs of the housing ladder to get us into our 'final' home by 35.

We renewed our mortgage 12 months ago at 2% fixed for 10 years on a 13 year term. We also took out addtional borrowing to renovate the house at 1.5% fixed for 7 years on a 10 year term.

This means our mortgage debt will be nearly gone by the time we exit the fixed deals, and the aim is to clear the all the debt (including addtional borrowing) around 50, with a fully renovated house that's worth substantially more than what we paid for it.

To enable this plan, 50% of my salary goes into the mortgage payments due to the aggressive short terms of the borrowing. This means even though my salary is high, I still 'budget' reasonably carefully. Some financial diligence will hopefully mean in a few years time we are 'sorted' for life.

Personally I think period of low interest rates we've had has been a 'once in a life time' opportunity to swap essentially 'free' money for physical assets at very little risk. But the party is now well truly done, but depending on how long you fixed for, actually wage inflation will cover a sustainable part of the cheap borrowing, so there is an after party going on somewhere.

I got burnt in the 2008 housing market crash, and learnt some really valuable lessons. Hopefully I've navigate the risk of the current housing/mortgage market better this time round!

 

[lazybloke]

It’s also pretty pointless when most people are on fixed rate mortgages which may not need renewing for years, so it has zero impact unless you are due to renew soon.
If you were lucky enough to get a 5 year fixed just before Truss was PM you should be well insulated from all this.

Some folk reduce their exposure to interest rate spikes by:

a) Fixing for the longest affordable term, rather than the cheaper 1 or 2 year year deals
b) Choosing a morgtage with no redemption penalties, giving the flexibility to choose renewal dates ( at an opportune time)