Remortgage woes

[gzoom]

a) Fixing for the longest affordable term, rather than the cheaper 1 or 2 year year deals

I think issue is many people who bought their first house in the last 10 years have never known interest rates of more than 1.5% till now. The headlines I read on 'mortgage shocks' etc seem rather odd, as for anyone whos had a mortgage before the mad period of 1.5% products knows the 'normal' is 5-6-7% products.

Infact even now I think lending is 'cheap' compared to inflation, I've secured another lot of additional borrowing at 4.5% incase our build project needs the funds. 4.5% is still over 2% cheaper than my first mortgage in 2008.

 

[Gunk]

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.

wow, that is a huge percentage of salary going out on mortgage repayments (ours is less than 15%) you must live like church mice.

 

[Alex321]

wow, that is a huge percentage of salary going out on mortgage repayments (ours is less than 15%) you must live like church mice.

50% of take-home pay was pretty well the norm when we started in the '80's. And that was when the most you could get was 3+1 (I.e. 2 times main earner plus 1 times second earner), and with a 20 year mortgage.

That reduced quite a bit over the years, as my salary rose, while interest rates fell.

 

[Lookrider]

I'm not a broker nor financial advisor but I had overpaid my mortgage over the years several years ago ..I was told by an advisor at the time that was a good move
As I had overpaid the bank could not chase me if a faulted until this overpayment had been "used" up
Anyone who has overpaid...and now there monthly payments have increased..you can ask for this to be taking into account and do not have to pay anything at all per month until the overpayment catches up ...your buying time really ....but your overall loan will obviously increase ...but it may tide you over till things
Hopefully improove

 

[ColinJ]

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.

My sister owns a property in the Midlands and is getting into that situation now. She has just spent thousands of pounds doing up the property and the mortgage is up for renewal soon. The previous tenants have left so she will either have to put the rent up a lot for new tenants or sell the property instead while she can still get a reasonable price for it. She is worried about getting stuck with a property that is losing money or being forced to sell it at a loss.

 

[vickster]

wow, that is a huge percentage of salary going out on mortgage repayments (ours is less than 15%) you must live like church mice.

Depends what it’s 50% of though…100k? 200k? 400k?

 

[gzoom]

wow, that is a huge percentage of salary going out on mortgage repayments (ours is less than 15%) you must live like church mice.

Not a mouse, but I do budget fairly carefully. My wife has a slightly lower salary than me (gender pay gap), we treat her salary as the savings account. I tend to end each month with very little spare. But obviously enough to cover the mortgage which goes out on the 1st a few days later than the previous payday which is normally 28th of the month.

Money doesn't grow on trees, but the last decade it has been almost 'free' at time, so we've taken that opptunity to move up the housing ladder after some careful risk taking (when we fixed our mortgage renewal there was some talk of negative rates!).

Depends what it’s 50% of though…100k? 200k? 400k?

My mortgage payments have always been between 40-50% of my salary, I rather overpay than have a lower payment that increases the cost of debt over time and leaves you exposed to higher interest rates.

Regardless of my total salary watching/knowing 50% of your pay disappears overnight everymonth is a good reminder of the need for financial prudence........it's why I haven't ordered some Revol carbon wheels for my bike, though they are currently onsale......so tempting, but need to keep a roof over our heads first .

 

[rogerzilla]

I'll copy one of my own posts from another forum to illustrate why "meh, I remember paying over 15%" is a false comparison.

Back of the envelope calculation.

A first house in Birmingham in 1990 (I bought one) was about £35,000.

A first house in 2023 in the same road, if you can find one as bad as mine (!) is about £250,000.

95% mortgage in both cases - in 1989, at 15.4%, it would be around £360/month with MIRAS on the first £30,000.

In 2023, at 6%, it would be £1,550/month, obviously with no MIRAS.

That's a 47% increase in real terms. Real median post-tax incomes over that period have risen by 50%. So "6% now is like 16% then", which I've seen quoted, is just about right.

Feel free to quote this to boomers who say that GenZ spent it all on avocados and smartphones. I'm GenX and on my second mortgage, so I have experienced both markets

 

[gzoom]

I'll copy one of my own posts from another forum to illustrate why "meh, I remember paying over 15%" is a false comparison.

Back of the envelope calculation.

A first house in Birmingham in 1990 (I bought one) was about £35,000.

A first house in 2023 in the same road, if you can find one as bad as mine (!) is about £250,000.

95% mortgage in both cases - in 1989, at 15.4%, it would be around £360/month with MIRAS on the first £30,000.

In 2023, at 6%, it would be £1,550/month, obviously with no MIRAS.

That's a 47% increase in real terms. Real median post-tax incomes over that period have risen by 50%. So "6% now is like 16% then", which I've seen quoted, is just about right.

How many families were single income only in 1990 vs now. I know my parents were very stressed because my dad was essentially the only one bringing in decent income.

Compared to our situation, we can 'comfortably' use 50%+ of my salary on the mortgage because my wife's income nearly matches mine, which means rate rises have far less impact.

 

[rogerzilla]

How many families were single income only in 1990 vs now. I know my parents were very stressed because my dad was essentially the only one bringing in decent income.

Compared to our situation, we can 'comfortably' use 50%+ of my salary on the mortgage because my wife's income nearly matches mine, which means rate rises have far less impact.

Good question. I think a lot of couples apply on a joint income basis but soon end up on a single income when children come along. We did, although we'd done the sums, could just afford it on my income, and took out a 10-year fix (in 2002) to tide us over until they were both at school.

If one of the parents returns to work, their income will largely be eaten up by childcare, especially for two children, unless family are providing this for free.

 

[Jody]

BOE interest rate has just been announced as increasing to 5%

 

[icowden]

Not that it's much help - but you can end your mortgage early and suck up the penalty. I negotiated a new mortgage last November (Fixed 4% for 10 years) with the actual mortgage going through on 1st April this year. It cost me £1200 in early repayment but that was well worth it to get the mortgage fixed for the foreseeable. Slightly angry that I hadn't done it about 2 months earlier which would have been a difference of £400 a month.

 

[Beebo]

BOE interest rate has just been announced as increasing to 5%

That’s a 0.5% increase!

 

[Gunk]

That’s a 0.5% increase!

It’s their only tool to curb inflation, unfortunately if they go up any further it could end up taking us in to recession.

Next industry to suffer will be the motor trade, cheap lease deals are now a thing of the past and with rising mortgage costs, a fancy lease car on the drive is one of the first things to go

 

[SpokeyDokey]

What I am not understanding is the money/News sites are showing all manner of tables indicating repayment mortgage payments per month at various annual interest rates.

What they don't show is the income level required to obtain these mortgages in the first place.

Has the income multiplier varied much from 3+1 since 2008? Genuine question as I have not had a mortgage for a long time.

As an example, from one site a £400k 35 year repayment mortgage at 6% interest will cost £2281pm up from £1325pm at 2%.

How is the higher rate of £2281pm not affordable for a person or couple who has obtained such a mortgage in the first place?

On a 3+1 that would be a walk in the park.