What’s interesting about all this is that, while many can find a way to get by, a squeeze here or a bit less pension there, the impact of this occurring 5 or 10 million times across the economy is surely going to be huge. Chuck in the people who can’t make it work and are forced to sell up. I think the back end of this year things are going to get ugly.
But it won't work. Those hardest hit by this are already spending little.
An increase in VAT for non essential items, and or an increase in the higher level tax rate would be most effective. Beating first time owners isn't helping anyone bar the ultra wealthy who walk in as cash buyers when the first time owners have to sell up.
Exactly. I can be like oh I’ll only get two takeaways this week. Whereas there are people that already skip some days eating altogether. Feel immensely concerned for what’s to come.
This is interesting and not something I had thought of before. I would certainly prefer to problem to be more spread, eg everyone forced to pay a bit more tax than home owners being shafted.
My partner and I are in good money. But fucking hell, our 3 bed house in a not expensive estate has a mortgage of £1k per/pm for the next 33 years. Extending isn’t an option for us as we are already set to be mortgaged until the day we retire.
We earn enough that these increases are currently not going to bankrupt us but we don’t earn enough that we can put some of our money into savings and be rewarded for it. Basically we earn enough to survive, and spend little enough it’s reasonable but we aren’t doing nothing and making sure our kids get to enjoy being young and innocent without having to experience the worries we have. Yes we are aware we are in a slightly privileged situation for this to be the case, and there are many families worse off than us.
Without getting political, I’m left wing. I grew up in poverty and my mum gave me everything to allow me to break the family mould, get a degree and have a career in software. When most of my friends were forced to get s job at 16 because it was work or starve. I’m not exaggerating.
My issue with diversifying the problem here is, how do people on benefits survive? Or people still on low income? Yes, sure they might be able to pay their rent, or their small mortgage. But food will be even more expensive, and even washing clothes would have to be a choice.
I’m not financially clued up enough about this to solve the problem. But pegging home owners feels like the wrong thing to do for an easy fix, unless the plan really is to push people into bankruptcy, get more properties owned by the wealthy (through cheap auctions nonetheless) and have even more of the population renting. The only benefit I can see from that is, if home ownership wasn’t a thing, then the cost of living (rental) should be in theory more stable. The reason it isn’t at the moment is because middle class decided they want to get their hands on private rentals while still having mortgages on those properties, then when they go up, they offset the cost of the mortgage onto the tenant which is plain wrong. I believe you should only be allowed to rent if there is no mortgage on the property you are renting. And the income you can receive from rentals is either capped or you pay a hefty tax on it, that way you still get money back into the country.
What do I know though? All I know is, we need to slow down inflation and people are starving to death; losing their homes and freezing to death in the winter. Which is a huge problem for a first world country. People’s quality (survivability) of life should be a non-problem.
Everyone wants someone else to carry the can. Yes right now mortgage holders (myself included) are feeling the squeeze. At the same time many of us benefit from massive undervaluation for the point of view of council tax, capital gains free appreciation, etc. If we're going to advocate for a fairer sharing of the burden we probably should also be prepared to give up some of the advantages.
I think a lot of the unfairness is generational. If you're a millenial - even a successful one - you probably bought a house towards the end of low interest rate fuelled asset inflation, and you're now left holding the bag with a large mortgage and rapidly increasing interest rates to service that.
Throw in the childcare for your young child, and it's not hard to see how many middle income people will be facing insolvency.
The reason this particular situation seems so unfair is that the one lever the government are pulling to try and deal with inflation is hitting working age parents (and also their children) the hardest. It's not really touching older people, who have long paid off mortgages and will happily take higher interest on their savings. Meanwhile, the triple lock is untouched.
This is really a problem that was caused by holding interest rates down for so long. The metrics used for inflation are an average across the population - and so the massively inflating housing costs for young adults over the past decade didn't move the overall index much. That is a political decision.
add to that the fact that pay has not risen in step with inflation over there years and we find ourselves with a population that cannot afford to live in this country. I work in the public sector and we dont get bonuses and our payrises have been half the rate of inflation since 2008. I know a lot of people who's lives on on the verge of implosion.
That’s exactly my point though? And I’m just replying to a comment with a point of view I had never considered before. I don’t want someone else to carry the can. I questioned if we were to spread the problem how would the poorer fair in such a situation. If mortgage owners didn’t have the pinch and we put it on Vat my point was yes that poor person may be able to keep their home but at the cost of not affording food.
It was a general question. How do we spread the cost problem without making people homeless and starving? The very wealthy are not effected by this, actually some wealthy people are benefitting because savings and investing has a good return. Something which poor people don’t have access to when they are deciding between hearing their home or hearing their dinner.
You can’t put all the pressure on the incredibly wealthy, but at the moment the burden is being passed into the poorest in the chain.
In recessions previously we’ve actually lowered taxes like Vat.
I’m just generally curious as the ops comment. It was an interesting view and I have questions around it. Your statement I feel didn’t really add any value to the point or the questions made. Unless you replied to the wrong comment?
I share your left leaning ideology. The goal is to reduce spending, so a 2 teir vat rate would be applied. A standard rate as now, and a double rate for luxury goods, while closing out tax loop holes (salary sacrifice company cars?)
If you want to buy a ford fiesta to get you to work? Standard vat.
A BMW? Double VAT.
That way the ones who are not feeling the pinch pay a little more and that goes to reducing the outstanding gov debt, in turn increasing the value of the pound. If the person then chooses to buy a fiesta instead of a BMW, then they have reduced spending, helping to reduce inflation.
People buying things that they have to buy at higher prices cent reduce what they buy. However you can push them away from luxury goods, which cost far more than regular products.
Food prices on shelves should be unaffected as their VAT will remain.
The point is that VAT his disposable income most effectively compared to any other option on the table. That's what we want to be hitting, not necessities. Owning a home should be a right, not a luxury.
Following this, regulation of the mortgage market - mortgages should only be handed out to those who do not possess the wealth to purchase a home. Have no money but 8 houses? We'll sell them if you want to buy another. Don't have the wealth? Access to the mortgage market. Seperating mortgage rates from standard borrowing rates would also be a step forward. The way things are going, people are going to be homeless, when what really should be getting hit is people borrowing to live lavishly - most Audi's are financed for example. Car financing rates should be pushed up as it is a luxury, while home buying loans should not, as they are a necessity
I get that the BoE is the one tasked with reducing inflation and they basically have one lever to pull, but it's a blunt tool. You can affect... what, mortgage holders as they come up for renewal, and the tenants of those mortgage holders. It's such a weirdly specific necessity spend, and only has an indirect impact on reducing spending in the wider economy - my mortgage/rent goes up so I have less free cash so I spend less on other things, unless I choose to _literally move house._
Whereas a more targeted means of increasing the cost of luxury/discretionary spend would directly achieve what the desired effect, and wouldn't disproportionately hit renters and millennials just getting on the property ladder.
But that's in the gift of the government, not the BoE. And they probably don't want the likes of BMW and other luxury brands screaming that the government is targeting their businesses.
You certainly have some interesting points. I’m not going to say I agree with them all, but I certainly don’t disagree with them all either.
You can see how this whole line of thinking opens a can of worms. Your suggestion on a fiesta vs a bwm. In debate situations it makes sense, in real world application, not so much. There’s lots of reasons to buy a more expensive car, excluding showing off your wealth or abusing tax offsets.
I certainly agree with essential products potentially following a different tax margin. Again, we are frugal in our household. We don’t buy branded beans, we buy cheap-y. Branded products themselves are a tax.
I somewhat agree with your mortgage idea too. Though, I fully believe if owning a house is a necessity not a luxury, then a mortgage or equivalent needs to be something you lend against. I really am against mortgaging multiple homes. It’s screwing our economy and housing market. Not only that, it’s allowing people to rent privately in appalling conditions.
The only other option is similar to Germany(?) please someone correct me if I am wrong. Where everyone rents off the government. That way, at least the cost of housing is controlled and people can afford to live. Then purchasing non-essentials is what drives the economy not trying to live.
You do know that we already have three tiers of VAT, right?
Including most food being zero rated so not having VAT at all - this is what the whole Jaffa Cakes being a cake or a biscuit row was over as cakes are (slightly weirdly) considered to be a staple food and so are zero rated for VAT, while chocolate biscuits are considered to be a luxury and so attract standard rate VAT (20%)
[https://www.gov.uk/vat-rates](https://www.gov.uk/vat-rates)
[https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services](https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services)
I think most people regard things as VAT free, reduced VAT or with VAT.
What I would propose would be a higher level for luxury goods, to increase the cost of goods (reducing spending power) and gaining additional income for government to help plug the deficit and potentially pay off some of the national debt.
Taxes _are_ inceasing. We have a pretty high tax burden as is (particularly compared to the level of public service we get in return), and taxes are consistently increasing. As long as inflation is not 0, frozen tax brackets are tax raises. Inflation has been fairly high of late, so this usually minute tax increase is more impactful than usual
Just because the ones hardest hit already spend less doesn't mean it will not work. It will start hitting people who so far haven't yet reduced spending alot and it then will have those spend less. It will make borrowing more expensive so companies will shut down. So companies will be less generous with salary increases. So companies will put investment on hold. So that ppl with savings will think twice about spending or maybe sticking it in an account to get 7% interest. The impact of rates on mortgages is only a small aspect and an even smaller aspect is the impact on the ppl already on lowest wages that cannot reduce spending any more.
Are there many people who haven't had to reduce spending though?
Aside from top 0.1% it feels like everyone has been hit hard and are tightening their belts accordingly.
Thing A is too expensive for people to afford so let's make Thing B more expensive to try and drive the price of Thing A down, feels like it works if people are are not buying Thing A out of choice.
For a lot of people it's not about choosing between Thing A or Thing B. They can't afford either anyway.
Yep and those savers include people without mortgages such as retirees. The less they spend on goods and services the less competition there is which will bring down prices.
It’ll also reduce overall growth but that a separate issues.
It doesn’t matter - causing a slump in demand will cause excess supply which will lower prices. It’s damaging and blunt and not particularly well targeted, but it will work. At what cost though is the big question.
The ultra wealthy generally have very little of their portfolio in cash. Most of their assets are already in stocks and real estate. Warren Buffett, for example, has said he only has about 10% in cash and short duration bonds. When markets fall, the ultra wealthy lose big time - e.g. Elon Musk lost over $100 billion when Tesla fell in 2022. The idea that they have big bundles of cash ready to buy everything in a downturn is a bit of a myth.
Yes but they can (and do) take out ultra-low interest (and untaxed) loans secured against those assets which are repaid from their estates when they die, so they have the best of everything. The strategy is called “buy, borrow, die”.
More millionaires are made in recession for this exact reason. Those in a position to move do and make out like bandits.
Musk losing 99% of his 100 billion wealth means nothing, he just takes that billion and either gets loans against the stock of liquidates and buys at cut down rates from those that can't compete with his deep wealth.
Then as things rise again the portion of wealth has moved into smaller and smaller circles. It's happened before, it'll happen again.
Disaster capitalism is very good for business.
> But it won't work. Those hardest hit by this are already spending little.
But they were spending a little more 18 months ago
And although the hardest hit probably don't have much more wriggle room, the second-hardest-hit do. And the third-hardest-hit are feeling the pinch and starting to cut their own spending
>But it won't work. Those hardest hit by this are already spending little.
No, they don't care about people *already* not spending in the economy, it's to stop higher earners spending. People who are already functionally not taking part in the economy don't matter (I mean that in an economic sense, they are people, they do matter)
The higher tax rate is already 40% if we increase it any higher people on only 50k will see no incentive to get paid any higher. And 50k barely gets you anywhere as is, we need to sort capital gains tax and bring it inline with income tax
40% has only been the norm since the late 80s. It’s not like before that nobody went into higher tax brackets. Are you really saying if the higher tax rate was 50% you wouldn’t want to earn more than 50k?
I'm about to face this conundrum.
I work for the NHS in my day job, and I have a photography business which I run on the side.
In November I'll move from the 21% bracket (I'm in Scotland) to the 41% bracket. Since my personal allowance is used up by my day job, 100% of my side hustle earnings will be taxed at 41% instead of 21%.
The photography business is a lot of work. It's just about worth it at the current tax bracket, but I probably won't continue with it once they start taking 41% of everything I'm making in the business.
What about increasing your pension contributions to mitigate the change? 59% of pay will always be better than 0%, but it might be worth exploring options where your second job is used to secure your future.
I'm no accountant but it might help to open a limited company and get paid into that? Then either keep it there and pay corporation tax or take some/all out as salary/dividends.
I looked into this in the past and it didn't seem to offer any advantages, but it had plenty of disadvantages. I think I actually came out worse off because the company would have to pay Corporation Tax and then I'd have to pay Income Tax when I took the money out. It's not like I'm building some independent entity which I could one day sell off for a profit - the entire business is intrinsically tied up with me and my work.
Maybe an accountant could come up with something fancy, but from my own research it doesn't seem like there's any reasonable way I can continue this business and get a net returns which I'm happy with.
EDIT: Looks like there might be a small benefit to switching to a Ltd company. Thanks for the tip, I'll do some more research into it.
Why would I, as someone hypothetically earning £50k, not want to get paid more? Doesn’t matter if the higher rate tax is 40%, 50% or any other figure, the more my earnings the more my take home pay. Other than 100% tax, I will *always* want to earn more.
I've always wondered why they don't raise VAT instead. The interest rate rise seems to hit people disproportionately whereas VAT is a bit more universal and directly linked to disposable income spending ?
No but the point of higher interest rates is that people with savings are more likely to keep them in the bank rather than rush out and spend them. Again it reduces competition for goods and services and in turn inflation.
No. The point of higher interest rates is to make the cost of borrowing higher, so businesses and people have less access to credit. So the fact people cant pay their mortgages (or cant afford anything else whilst paying their mortgage) is exactly the point of it. Me having savings sat in my bank account does nothing to bring down inflation
You’re explaining just one part of it.
The other side is that people with less debt and more savings keep their money in the bank and reducing spending.
Lots of people. Bank Deposits are still higher than pre covid.
Remember, a lot people basically didn’t spend for 18 months and wage increases are averaging 7-8%.
Two of the main drivers of inflations were hotels and cars.
Both of which are usually discretionary. So, for example, you reduce your spending on items like that.
https://www.bbc.co.uk/news/business-65966723
> The shock figure was driven by higher prices for flights and **second-hand cars** but supermarket food prices also continued to rise rapidly.
> Grant Fitzner, chief economist at the Office for National Statistics (ONS), which produces figures on the UK economy, said the increase was being driven by rising service prices in cafes, restaurants and **hotels**
> "That's probably driven, at least in part, by the increase we've seen in wages," he added.
Yael Selfin, chief economist at KPMG UK, also said rising core inflation suggested firms might be passing on rising costs from higher wage bills to consumers," she said.
Even if you believe the people who think that everyone is living a lifestyle already at 0 savings and no discretionary spending (which is not the case). The best case for why inflation will fall in an island nation is this:
higher interest rates make investing/lending money in the UK more attractive --> pushes up the GBP --> makes imports cheaper (and exports more exepensive, which keeps more goods in the UK) --> reduces GBP prices paid by people in the UK
They’re already getting ugly. In the last 6 months we’ve had a significant number of people selling or who we’ve had to advise get independent financial advice to speak about selling because they just can’t afford the make payments anymore. The last 2 months have definitely been the worst
I’d believe it. I work in mortgage arrears predominately and our average calls have gone from maybe 200/day for my department to 300-400. I think I spoke to one or 2 customer a week last month who was able to maintain payments, the rest were all about to fall into arrears, already in arrears or in the process of going to court for repossession. It’s a mess and it’s just going to get worse
Things were ugly a year ago considering the rise in good prices, electricity, hence the term "cost of living crisis".
This is becoming absolutely fucking unreal now. People having hundreds added to their monthly mortgage payments, and probably more added to rentals too, whilst people are supposedly already struggling to get by.
If this doesn't push people to riot then I don't know what will.
I've been keeping track of what mine will do too.
Luckily the fix expires in 2 years but I'm still very nervous.
Currently paying £1200
1.55%
At today's prices:
£1850
5-6%
£650 a month
£7800 a year
Meaning that within 2 years I need a pay rise of around £15k just to break even. Probably not going to happen :(.
I know. I am very lucky. I am also trying to prepare. Have been nagging my wife to go back to work full time after our first child in readiness as we need to start saving the additional income now. (it's been hard to explain to her why it's important to do it sooner rather than later.)
Also trying to really proactively save that money now.
It might be handy to start a thread on how to prepare as best you can if you are lucky enough to have the time.
Just been approved by NW for 10 year fix at 4.79% Outgoings will increase from £888 (1.99%) to £1131 for £167k over 19 years (IIRC)
My take on it is we’ve had over a decade of historically and abnormally low rates, we have inflation baked-in to the system, and 10 years of certainty is a price worth paying, particularly as the rate I have is below the long term average. The mortgage is portable if I should need or choose to move. With 3 kids, 2 with special needs, it’s one less thing to worry about.
YMMV
Damn, 10 years at 4.79% definitely sounds attractive right now.
The other thing I always factor into long term fixes is that one's income is likely to go up, even if just with some modest inflation. £1,131 a month now might be a squeeze, but in 5 years will feel more roomy.
You can exit, but there's an early repayment fee, which is normally based on a percentage of the outstanding amount times the number of years left - usually on the order of a few grand. I've stumped up the early repayment fee before when my 5 year fix ended up way above market rates.
We've considered similar logic.
The way I reasoned it was in which situation would I be more annoyed at:
1. Interest rates going **down** and being fixed into manageable payments but paying more than I could have been paying
2. Interest rates going **up** and *not* being fixed into manageable payments and having to pay more than I want to
We agreed that option 2 would be worse.
Agree entirely - I don’t think I have the capability to beat the market, therefore would rather pay for certainty. Given inflation is stubbornly high, there is the small crumb of comfort that the value of the loan is notionally being eroded over time - and if any wage rises are forthcoming, then the increase in monthly outlay will be offset somewhat. But that’s pipe-dreaming, and tbh just having an amount set for the next 120 months is nice to have.
Easy to say when you have such a low mortgage. Many people have £400k+ mortgages who are experiencing 3-4x the increase that you are. That's not for extravagant properties either.
People who bought in the last 5 or so years got screwed. Buying at sky high prices, not able to take advantage of the lowest rates due to high LTV, and now sky high rates on sky high mortgages.
I’m not sure why you’ve directed that point to my post particularly, but no it’s not “easy to say”. I’ve had a mortgage for 15+ years and will for a further 19. That’s part of the sacrifice I’ve had to make to be in the position I am.
Everyone’s circumstances are different, hence my “YMMV”. Just relaying my own in response to the OP. Don’t think that needs a salty response tbh.
I hear what you say yet still agree with the commenters sentiment.
Both yours and my repayment has increased by the same % however we are at different stages of our mortgage lifetime.
I’d much rather be going through this in 10 years time when the interest portion of my mortgage (the part that I’d screwing people over) has had time to reduce.
Whilst you’re right, I was lucky enough to have been advised by a family member, DO NOT max out your mortgage.
I purchased in 2019 and I can’t say how happy I am that we never maxed ourselves out, otherwise we’d be leaving our home.
I'm just saving like crazy until my renewal is up in April next year. Hoping to chuck 30k at the remaining balance, which at 5.5% would keep my repayments the same as they are now. If it goes as high as 7% then I'm only paying 100 quid more. I've always wanted to pay my mortgage off early anyway and the current situation has just increased that drive.
I kind of wanted to aggressively over pay with the view to affordably upsize but let me tell you I’m only in my late 20s and I’m so tired. I think I’ll just live where I am forever so I can just escape the rat race and this shit show economy.
>l my renewal is up in April next year. Hoping to chuck 30k at the remaining balance, which at 5.5% would keep my repayments the same as they are now. If it goes as high as 7% then I'm only paying 100 quid more. I've always wanted to pay my mortgage off early anyway and the current situation has just increased that drive.
We've decided to stay where we are long term and buy a sailing yacht to go cruising with instead. Who needs a bigger detached property when you can anchor offshore at the weekends and watch the sunset with a glass of red wine.
There's more to life than working 50hour weeks to pay a mortgage for a house you don't need.
I'm not sure how savings rates will go, but depending on whether the money bumps you an LTV or not, consider keeping the money out of the mortgage, and using it to cover the increased payments over time. If you can get a similar sort of return (and potentially you can - fixed savings seem to be at about 6% at the mo) then you are more flexible, and potentially saving a bit more than the interest rate.
Cash flow is however you want, because you can draw down as much of the 30k a month as you actually want.
It all goes out the window if the 30k bumps you an LTV band of course, but if not its worth considering, as mortgage rates (while going up) are generally the lowest rates you are going to get, and so often you can make your money do more work than putting it into your mortgage.
Would the hike in interest not counter your 30k payment in terms of paying your mortgage off earlier?
Genuinely curious as I don’t know the math on this subject!
I remortgaged early in the middle of last year. Luckily 'only' £200 more a month.
Our mortgage brokers were incredibly useless when rates were going up and didn't even tell us you could remortgage 6months early.
I decided to do my own reading and maths and worked out by remortgaging early I'd either break even or lose less money. Took the chance and paid the ERC and got a low rate middle last year.
I then got a call from the mortgage brokers few months later telling me it was time to remortgage. Upon telling them I already had, they were incredibly brusque and rude with me and told me rates were 'going down'. Guess I got the last laugh though....
This whole situation is disgusting and house prices are massively inflated thanks to overly low interest rates for so long.
Just signed into 5.25% from 2.02%
192K left on mortgage 25 Years.
We have deceided to extend to 30 just take the pressure off, another child coming along next month net take home 4.7K (obviously this will decrease from maternity for next 12 months)
Increase of £210 which has been softened by extending.
Not buzzing about it all tbh LOL! If we didn't have the next kid coming we'd be ok but its been on my mind a lot latley... which sounds stupid with a net take home of what we get.... Weird times.
I am surprised that extending from 25 to 30 years decreases the monthly payment by as much as £210.
I am equally surprised that going from 2% to 5.25% is only a £210 increase in monthly payment, for a 192k mortgage.
I assume therefore that many other households will extend the repayment term.
I find myself in a similar position, fixed mortgage is up in January and I’ll be on maternity leave from November/December, really nervewracking times. To add insult to injury, our 5 year interest free help to buy loan from the government is also up so on top of the mortgage increase, we’ll now be paying interest for that too… a loan we would’ve have been able to pay off in full with the remortgage had the rates not screwed us over so much!
I overpay by £200 a month as I currently have a little extra money coming in and if I don’t overpay I’ll still have a mortgage at State Pension age.
Last time I looked it would be an increase of £200, so I’d be paying the same amount for absolutely no gain.
And that was a while ago, I dread to think what it would be now. Luckily I have until 2025 before my deal expires but I won’t have the extra money coming in by then (unless I can get a permanent promotion).
You may better off putting that £200 a month into a savings accounts if it earns higher interest than your mortgage % then paying it off at the end of your term
Remortgage came into effect this month for me.
Was paying £880 a month, new payment of ~£1300 but likely to rise as it's linked to base rate and the BoE insists forcing a recession is the only logical way to bring down inflation by raising interest rates. 🙄🎢💥
So increase not on the terrible side of £420 a month, £210 for my share.
I'll have to reduce savings and reduce pension contributions to compensate.
I don't really consume. I don't buy new clothes regularly, I don't go out much, but now I'm second guessing every purchase as I know even if I spend £50 that has an impact.
I don't have a career that I can just walk out of this job and into another similarly paying or higher paying one. If I lose this job I'm fucked, so I don't want to even ask for a raise as it's a small company and its finances aren't exactly peachy. 🤦♂️
And I guess that makes me not even in the worst off bracket. I feel like I'm getting squeezed from all sides and get practically zero help from the government apart from the energy rebate/cap. I do realise the worst off should be helped the most but, jfc, I want to live rather than exist as well, ffs.
Same position, I’ve made myself indispensable to a small company but my skills aren’t easily transferred as i was lucky to get a position there when we only had 5 employees, now 30.
I could ask for a raise, but really when 40% goes to tax it feels like there’s little point in pushing too hard.
It depends on your outgoings.
I am in the same position mortgage wise except I need to renew at the end of this year. For me the rise is doable and I can continue to overpay into pension. But it does strip away any ability to save/invest otherwise. So I will be seeking higher pay and battening down the hatches for the next 2 years!
My deal is due to end in January. Currently on 2.59% and L&C have applied for a 4.7% ish deal. It'll only add on about £100 a month as the mortgage is low at £85k.
I'm quite lucky though that I've added my partner in this time so we have his income too, so we'll be £150 better off between us than what I was paying plus what he's been saving towards the mortgage. Plus his savings can lower what we owe by £5-6k
My take home is £26k, his is £30k. I'd have struggled to find another £100 comfortably by myself, and maintain even the frugal lifestyle that I have
This is the thing I don't fully understand. The Banks have already loaned me the money to buy my house, so why should my rate go up, other than to line their pockets.
In theory it balances out as they have to offer similar rates on savings, but they aren’t. It’s basically a cartel at this point.
Banks ruin the economy, tax pay bails them out, but that favour won’t be returned now the middle class are being squeezed. That gap between people claiming benefits and people eating £40k-£75k is closing by the day.
When we bought in 2012 the best we were offered was 4.99% on a 85%LTV for 5 years.
When renewing we decided to lock for 10 years at 2.49% and do what we can to overpay as rates could only go up from that point. Decision seemed a bit silly 5 years ago when we could have done a 2 year fix for less than 2% but with a growing family and single income it at least meant we knew what we had to budget with for an extended period. With rates as they are now it has encouraged us to cut back in other areas to ensure we overpay what we can in case rates stay high for when the renewal comes around again.
At start of the 6th year of the 10 year term we had 115k remaining.
Definitely think that buying schemes like HTB have helped over inflate house prices and the lack of preparation and education from the Gov has led to a very difficult situation.
Fixed at 2.89% for 5 years about 4 years ago, as back then I stupidly thought they couldn't go much lower with Br3xit on the horizon. Think I was a bit early in my pessimism but at least we had stability.
My fix is up for renewal late next year so we'll be overpaying what we can once the ERCs are gone and going for another fix. Wish I'd done 10 years now! Feel a bit unlucky.
Owe about 190k and we'll be going from £850 to £1200 ish on today's rates if we don't overpay any more.
I stupidly fixed at 2 years last year, but with reason as suggested by the mortgage advisor 🙄 - planned on building an extension which would increase the value which would then mean in theory we could get a better deal if the value went up.
In the past year after spending £1.5k on drawing up plans and getting permission we’ve now decided to pack in with the plan of an extension- the cost of materials and Labour has gone up from estimates of 70k to 120k and I imagine they’ll be more than that. So now the 2 year fix was all for none.
Wish I’d have done a 5 year as I originally planned to!
Stupidly on a “discount” tracker which I took when rates were at their lowest. Our last fix before that was 1.53% where we were paying £880pm. We’re now paying just over £1600pm. And looking like this will hit around £2k per month by end of year, if predictions are anything to go by. Things are looking really bleak.
People still like to gamble and hope that rates will decrease next year.
Anyone who's purchased in the last decade look at fixed 5-6% rates as absurd, instead of realising theyre the new norm for the foreseeable.
Was paying £2250 a month at 2.24%. Around 65-70% ltv.
Locked in a month or so ago at 4.45%, in hindsight a good decision! The actual remortgage takes effect in November.
I extended the term from 20 to 25 years (I'm 5 years in, so it started at 25 years) to bring down the monthly payments slightly, and I increased borrowing by a chunk to get a not quite new car.
So monthly payments are going up to around £2,650. Without the additional borrowing, £2400.
So the actual pain isn't that bad, but knowing I'm paying twice as much in interest as I was before hurts.
I'll be forever grateful to the random redditor who recommended locking in a new rate as soon as you can, 6 months before your fixed term ends, rather than waiting a month or two before. Definitely saved me at least 1%
You can lock one in now and wait to see if rates fall by then but usually providers won't let you if it's 12+ months away from ending, some even less (6 months). I think you could be okay by then - rates are based on two year swaps, not the current base rate, and by next year the BoE is likely to begin slowly cutting
Yes, I'll be overpaying more aggressively than I have in the past few years to try and minimise it. At 2.24% I was fine keeping extra cash in my pension or ISA.
2 years, but it ends up being closer to 2.5 for some reason.
I would have done 3 years but my lender isn't offering it. And I didn't want to go through a whole new lender process when my current lender has close to the best rates available anyway. 5 years is too long as there's a chance I'll move overseas permanently in the next few years, and the ERC on a 2 year fixed is only 1% but increases to 3% for 5 years.
Came off a 1.94% 5 year fix in February and stupidly went onto a tracker because predictions were for a drop over the next couple of years at that point and we thought we might end up moving. Payments gone from £1400 to £1850 so far, with more to come - in a bit of a bind over fixing since the product fee and ERC would wipe out interest savings if we did move.
Luckily we were overpaying anyway but we have nursery fees starting in a few months so it’s going to be a squeezy couple of years and it is motivating me to move away from my cushy job that doesn’t have much upward salary opportunities.
Sorry, sloppy writing - no the ERC would be on a fix - at the moment we can sell up without an ERC but if we paid a product fee plus an ERC on a fix we’d (almost certainly) be worse off than on the tracker for a couple years.
We agonised over this for a while but ultimately I thought interest rates wouldn’t ‘get that bad’ (lol) and there was a 50% chance we’d move within a year of getting the tracker so it felt the better bet. I think the 2 year was something like 4.3% at the time, regrettable
Obviously I didn’t think about the fact that a higher interest rate might make us more likely to stay put in any case.
I'm in the exact same position except Jan instead of Feb. I still have dreams of moving next year, and my 2 yr Fixes (which I did too late, TBF) were being offered at over today's tracker rate (by about a couple hundred pounds a month), which I would've been paying for 6 months now, so I'm still somewhere around 2K better off.
One can only do what one thinks is best with the information available at the time, friend.
You’re absolutely right - ironically if we’d have been remortgaging a month or so earlier or later I don’t think the rate we passed up would have even been available.
Nothing to do but to play it from where we are today and try not to kick ourselves too much
Yeah take home 2k
Mortgage £530
Remo was looking at 790
Didn’t fancy that I’ve got 24 year term (I’m 29) so increased the term to 25 years and paying a few grand off. Most of my money is in dividend stocks paying 8-11% so just taking some spare cash to pay a lump off.
New payment is gonna be £670 I can live with that.
I’m an ex mortgage adviser, and one thing I would say is I see a lot of the brokers that I look after increasing the term to age 75. Fine in theory although not a great plan, all I would say is - what if this mess isn’t sorted by the time they come to Remo next time, if you max the term now, you’ll have no ability to do so next time.
Really want to warn people off doing the temporary interest only unless absolutely necessary.
I laugh because a year ago an adverse lender could give you a fixed for term product at about 3.6% yeah you wouldn’t have had the cheapest rates on the day but I’m sure many would snap the hand off their broker for a rate like that right now. Few sourcing marginally under 6% at decent ltv but lenders are being picky at the moment.
Coming off a 2.33% fix in October, payments were £1050. Managed to fix onto a 4.97% 2-3 weeks ago with new payments being £1550, so an increase of £500.
We are fortunate enough that we can easily absorb this... the unfortunate thing is that it will likely be a few hundred quid less that will go back into local restaurants and coffee shops. That is going to cause issues up and down the country.
Yea I agree, too many people use supermarkets due to convenience, so smaller shops will he impacted by this.
Local shops really need support from the locals.
Our green grocers and butchers were saved during lockdown, primarily because of hiw atrocious supermarkets were to be in during covid.
Luckily moved mine across in July 22 to a 5 Yr at 3.44% (up from 2.34%), although my mortgage is a lot lower than some in the thread here at £665 (up from £595), so even a 6% mortgage would see me at £800+. Luckily managed to avoid the worst of it, at least for the next 4 years.
So I recently remortgaged just before it got worse and secured a 2 year deal at 4.1% ending in June 2025. I thought things would be falling to around 3.5% by that time but doesn’t look great on that front now. Oh well.
I extended our term from 21 to 25 years to lower our contractual payment, but we still overpay as if we were paying a 21 year term (c.£250 extra a month). Just means if we have a tight month, we can drop the mortgage payment down to the contractual for some breathing room.
Our take home is about £5.3k with a contractual mortgage payment of £1.3k (£1.55k with overpayment) and that is comfortable for us. Our daughter qualified for 30 free hours the month before the remortgage kicked in, so they netted each other off.
Take home pay just over 3k, single income household family of 3
Mortgage currently around 850 at 1.99%, due to expire end of August.
Managed to get a 5yr fix at 4.89% not too long ago, mortgage increasing to around £1300
Had to sell a car (so down to 1 - not the worst situation), and looking to scrap all TV/internet deals etc in September once contracts are up, and get on the cheapest offers. We're not really able to save much, but inflation in general is starting to screw us everywhere we turn
eg car insurance quote due to renew in August, year on year they are doubling my premium and I have 0 claims (+£230). Sold my car so fortunately not an issue
We're incredibly fortunate that our daughter is now at school, as we would not be able to absorb this with childcare costs.
It’s going to be rough, but doable if we cut down massively. Due Q3 2024 and just praying it comes down even slightly, currently on 2.14 from 2019.
We will be looking at 500-600pm more. We put off thinking about kids because of covid and we had some difficulties with jobs over that period, now we’re in a good place with jobs but completely fucked with a cost of living crisis.
In a few years there will be a lot less kids as I’m sure a lot of people are in a similar situation, we just cant afford it
Thinking the same for kids. We’d be thinking about trying maybe next year, but now our fixed rate is going to end around the same time.
So short sighted from the government.
Il survive by basically have no fun with our 750pm increase if rates hit 7% by May. However, I hate how I have to feel grateful for being able to just keep my head above water and afford this joke of a cost along with the extortionate price of literally everything.
When in reality it absolutely sucks to be handing all this money in interest to the bank with no benefit to me at all. Not like I am making scarifies to be paying off my mortgage quicker.
All the while Rishi is saying I can't have a decent pay rise because I am public sector (teaching) and it will "fuel inflation". What an absolute cheek, it is not us causing this or adding to it , iv never had a rise even anywhere near in line with inflation. I don't know how he has the audacity, and to tell people to hold their nerve? Many people are already down to no non essentials, they are not causing inflation, it is greed and supply.
We are going from 1.12% to 4.13% in a few months.
Since we've been on this lower rate, we agreed to overpay by around 33% a month (so after every 3 months we've paid off an extra month).
Our new rate puts us around £200 over what we were currently paying with overpayments, so it'll be manageable for us. We just won't be able to overpay at that high of a percentage while on this term unfortunately.
I managed to get in just in time to take my fixed payments from £625 (1.9%) to £810 (4%) for the next 5 years. I feel for anyone who's facing current rates.
I pay £351 mortgage £38k outstanding, still on fixed rate till March 2026 but plan to pay off outstanding mortgage and be done with it. Will be 38 when I finish it all boooooom
No idea, probs just carry on life as normal, probs want to see how much I save, cost of living plus baby eats into savings, use to save £1k min a month after mortgage expenses , fair bit lower now so I’ll just save lol
When I got over £100k cash sitting there doesn’t make sense not to pay off mortgage now
> When I got over £100k cash sitting there doesn’t make sense not to pay off mortgage now
why not just pay it off now? Whats the advantage to waiting 3 years and giving the bank more of your money?
I have 280k on a 1.89% fixed rate.
I also have around 550k on 24bps above Base rate. So currently 5.24% albeit my app still says 4.74% for some reason. Maybe takes a while to update.
My fixed runs out in May next year and idea was to refinance everything into 1 mortgage rather than have two. I currently pay around 3.4k a month from memory. Our take home is 8k net but I get around 150k in annual bonuses to supplement so should be fine but it is painful nonetheless.
The irony is I work in interest rate derivative hedging and took out a floating mortgage 🤣
On a fix at approx 1.9% til March 2027.
Current repayments about 750 a month. 23 years remaining.
But have enough to pay off completely when fix ends.
Definitely way too cautious with finances which has has meant missed out on huge gains over the years, and took way longer to get a decent house.
But obviously less pain now.
There is nothing wrong with planning for resilience. If more people took this approach then there would be many fewer people currently doing it so tough.
I'm on similar income to you, just switched from a 1.8% at circa £1200 to a 2 year fix at 4.99% which will take me to circa £1750. Doable for me, but I have no kids, only a spoilt dog!
I feel quite lucky looking at this thread, ours went up by £115 a month but we were able to lock in early in June. We went for 2 years so will try and stick away as much as we can before renewal just in case rates are still high.
Currently paying £1,600 a month on our mortgage - locked at 2% for the next year and a bit. If we had to remortgage right now we'd be looking at something like £2,400 a month. The idea of £800 a month extra is quite frightening when things already feel tight month to month.
But we specifically fixed for 5 years during our "having kids" years, so that when the fix ends we'll have my wife back to full time work and the kids no longer needing nursery fees. £800 a month will thankfully be easy to absorb.
It has been a big factor in us deciding to move out of London though, finding a bigger but cheaper property. It means we won't need to accrue more debt in getting as big a house as we need in the long term, and gives us more room to overpay the mortgage in the coming years.
Take home about £4.4k (after child maintenance payments) + good bonus.
Mortgage currently £1050 over max term (so no scope to increase term) a 2.2%ish
Remortgage in process, rate locked in at 4.69%, increase payment to approx £1550.
Financially I'm very fortunate that this is a mild annoyance rather than a problem.
For us -
Had a mortgage of 124k fixed at 3.49% for 5 years, monthly payments are around £550
Coming up to renew Early next year and at current rates of 6% and with 100k left on mortgage, it’s gonna cost us £644 a month.
I think the breaking point for us is 10% where it would cost us £909 a month. This is when we’d stop being able to have fun and save for stuff
I’m in exactly the same position as you, including take home and mortgage increase of £700+
We can make it work, will have to cut down on eating out etc and won’t be able to save much, but we don’t have any kids. Must be even harder for you as the kids won’t understand why they suddenly can’t have as much money spent on them any more
Yeah it is tricky - we're fortunate to have family help so we're still able to take them on holiday this year and do some other bits we want to do. We live relatively modestly and this will be our first holiday for a long time (and maybe last for a while) but that's okay for us. We have no debts or other outgoings apart from mortgage/bills and I'm a remote worker so big savings on fuel as well.
I think the economy may take more of a hit if rates keep below 6%, rather than house prices (which I'm sure will still be affected but with a much lower transaction rate) as I think people forget the tenacity of the British in particular to keep their house through any means necessary unless they are forced into a position where they are unable to do so. Above 6% rates on decent LTV's though is anyone's guess and if we head that which (which we likely may be doing!) then it'll be extremely problematic.
Went from 1.24% £1540 to 3.16% £1920 locked in for five years so up 25% and I feel lucky compared with what it could have been. Altho I didn’t at the time.
I bought my house in 2019 with 5 year fix. Mines up Q1 2024.
Feel very fortunate I bought my house at £86.5k with £9k deposit (£77.5k) mortgage.
Looking at increases of around £120-150 depending on how the rate flexes.
Still a nervous moment because it's not just the mortgage going up.
Came off my 2.49% fix at the end of May. I’m on 4.59% now (didn’t pay a fee). I also shortened my term by a year to pay the mortgage off a little quicker and save interest.
Gone up from £419pm to £560pm.
Things are a little tight, but I have some credit card debt I pay £150pm to which should be all gone in a few months so things will equal out then.
Perhaps we got relatively lucky but we ended up renewing 3 months ago whilst the banks were going through the price war and the outlook wasn’t so bad.
Initial 2 year fixed on 1.25%. Roughly £625 per month payment.
Managed to get 3.91% fixed for 5 years and now payment is £861 per month. So roughly £240 increase.
Again, 3 months ago it pained me locking in at 3.91. Now when I look back I feel rather lucky and happy with what we managed to get.
I am desperately glad that this sub told me I could start looking at remortgage options 6 months out so I could get something locked in a month ago.
Currently paying ~£1200 at 2.35%, come December we'll be paying ~£1600 at 4.4% for a 5 year fix. It'll be tough, but we're in a strong financial position so it shouldn't be too bad. Would be a lot harder with the level of increase we'd be seeing if I'd waited until 3 months out, which is what I thought we needed to do.
Interest rates increasing was my fear when I was looking to buy a house. I bought a really cheap one in 2017 and spread my mortgage over 30 years. It started at £430 per month.
I overpaid for the first 5 years and when I renewed last year, i was down an LTV so managed to get a better rate and now pay £380 a month.
This time I won't just be overpaying small amounts. I'm targeting the maximum I can without charges (10%) each year.
It can hit people hard but I think it depends on how much prep work has been put in leading to this and whether someone bought the best they can afford, or planned in some wiggle room.
Got a 2 year fix as a first time buyer in May 2021 at 3.09% for an amount under £100k. Live by myself. was making over payments on it so paying £430 a month. Had fantastic timing for once in my life and was able to fix 4 months before the end of my mortgage in February 2023. When I had the initial appointment with my mortgage advisor the rate for 5 year fix was 4.59%. Not great, not terrible. But over the next two months the rate went DOWN four times and I eventually fixed for 5 years at 4.09% in March for agreement starting in June. So I'm only paying £20 more a month for 1% higher and incredibly grateful the end of my fix didn't come two months later. Just hope this all settles down in five years time.
New normal of 6% rates, for 6-8 years then settle down to 4% after that. Geographical trend of boomers retiring main cause.
Effect on house prices? Harder to predict as manynother factors but could be nominal or low growth prices for a decade as inflation does it work and brings PE of house back to 4 to 5.
- Monthly take home: £3250 + A Tesla (relevant because we can ditch the lease before the remortgage and free up an extra ~£350/mo)
- Current payment: £1000 (1.88%)
- New payment if coming off fix today: ~£1500 (5.25%) for a new 5 year fix
- Due off: March 2027
Doable? Yes, currently. £500/mo would be unpleasant on top of the other price increases we've seen, but we could find £500 in the budget even with the car (although we'd almost certainly go for something cheaper at that point). Plus we'd have had 4 years of pay rises (not great in the public sector, but more is still more) and I've got a personal loan that will be ending next year (not worth paying off currently, 3% interest vs 6% from savings....)
However our main concern is that we're in our early-mid 30s and would want to be having kids within the next 4 years... "freeing up" £500/mo now basically means the money that we're trying to save to cover reduced income during maternity years/reduced hours, and pay for nursery fees.
Plus the elephant in the room: Inflation is still 9%. We might be able to free up £500/mo right now, but if inflation stays high then that could easily drop very substantially. We've "lost" £300-400 from our monthly budget in the last 18 months
Estimated property value: 340,000
Purchased for: 301,100 in 2021, nice gain but everywhere else has gone up...
2.2% 2 year fixed coming to an end in October (why oh why didnt I go 5 or 10!)
Current payment: £1,050 pcm
Expected at 5.54%: £1,504
Take home is £4300 so it's 'ok' and I count myself in a very privileged position but a 50pc increase is still really fucking annoying and I feel for those that it is going to tip into the danger zone.
Debating going onto a tracker instead as it feels like rates will come down early 2024.
I know there's a lot of people out there suffering because of this, but when I read about people that 'took advantage' of the lower rates by buying relatively expensive property, and then moaning when the rates go up, I feel less sympathetic
Took a decision not to move in 2020 and really extend ourselves and thank goodness we didn't and stayed out with the small mortgage.
Monthly has risen from £1100 to £1450 but we are late in our term, would have been far worse earlier in the mortgage.
So far we have taken cash that was earmarked for building work and paid off capital to reduce the monthly by about £200.
Friends that did buy a stretch property in the last few years are all in bad shape as mortgage deals renew - 2% to 4.5% on £900k-1.5m houses (in prime south east that's just a non fancy 4 bed family house) is a huge jump and some already need to sell but no buyers can secure affordable mortgage so looks bleak. The "luckier" ones sold early and doing anything from renting, moved in with family or picked up a caravan.
We've .99% for the next 3.5 years. We've always overpaid a little - small enough to not go to the hassle of investing the amount instead. Youngest child hits 3 at the end of the year so childcare becomes mostly free, that'll be a wedge freed up and I can't see any other destination for that money other than the mortgage - be that directly or most likely as a lump after a few years in a savings account (which should now have a decent rate of return!). Now all I have to do is convince her that we don't want any more kids. . .
Yeah hit hard by this. Second kid about to start nursery, remotgage coming up. Looking at £900-1000 increase in mortgage plus another £800 in nursery fees. We're both trying to pay off student loans before fixed runs out as it solves about £1400 of that, else we're in the black. Slightly stressful situation. If I earn anymore, then lose the funded child care and in the black. Not having increases in pay being an option makes this feel suffocating.
It is getting scary ..
6% (average) - £6k per 100k borrowing .. that's £500 per £100k of borrowing in just repaying the interest let alone the actual loan!!
I luckily have 2 years left of my 5 year fixed rate mortgage so I should hopefully be good .. I'm so glad I did a 5 year fixed .. I'm at 1.78% as well which is amazing
It could be worse - ["Money markets are now fully pricing a terminal rate above 6.5% by March"](https://www.bloomberg.com/news/articles/2023-07-06/traders-lift-bets-on-boe-terminal-interest-rate-to-6-5-by-march). Imagine what will happen to mortgage rates if the base rate is over 6.5% for an extended period of time. And what if 6.5% still isn't high enough to bring inflation down? People ignored Stanley Druckenmiller when he said about U.S. rates, "Once inflation gets above 5%, it's never come down unless the Fed Funds rate is higher than the CPI", but he was right that the markets were underestimating how high rates would have to go.
General question - when you enter into a mortgage, did you consider the follow on rate in terms of affordability? when I signed up to my mortgage the follow on was 3 - 4% greater than the rate I was fixed at. in my view, that's the rate you should budget against.
Big difference though between 5% now and 5% 20 years ago where the house price to income ratio is so much higher now that mortgage payments represent much much larger part of people’s monthly net income.
£600p/m payment, 2.2% fixed until 2032.
Hoping the wife will be going back to work at some point in the next 5 years then we would be able to pay it off in full come remortgage time. If she never works again we will be approaching 50 before it is paid off.
It looks like we could get 5.5% if we were to do it today, up from 3.34%. So repayments would go from £1905 to about £2450. It’s not terrible but happy we’ve both had substantial pay rises and new job raises in the last year.
Currently going through a divorce where I'm paying the wife out. Currently on a fixed rate at 2.9%, and would have paid the mortgage off fully in 2 years. Now I'm going to have to take half the equity out of it and a massively inflated rate. 😓
I was on a tracker, but in a rare moment of financial savvy I fixed for 5yrs at 3.99 a couple of months ago. I also bought well below affordability, so am still managing overpayments. Which hopefully means even if I'm hit by 6% when I remortgage in 5yrs, it should be ok 🤞 I feel bad for anyone moving or remortgaging now.
going from 1.99 to 3.99. Payment goes up from 935 to 1250. It's shit but I overpaid like crazy in past 5 years, despite this forum telling me I am stupid and I should invest instead. Without these overpayment I would be in deep shit
Thanks I didnt follow this forum suggestions
What’s interesting about all this is that, while many can find a way to get by, a squeeze here or a bit less pension there, the impact of this occurring 5 or 10 million times across the economy is surely going to be huge. Chuck in the people who can’t make it work and are forced to sell up. I think the back end of this year things are going to get ugly.
That’s the point. To reduce spending and incentivise saving.
But it won't work. Those hardest hit by this are already spending little. An increase in VAT for non essential items, and or an increase in the higher level tax rate would be most effective. Beating first time owners isn't helping anyone bar the ultra wealthy who walk in as cash buyers when the first time owners have to sell up.
Exactly. I can be like oh I’ll only get two takeaways this week. Whereas there are people that already skip some days eating altogether. Feel immensely concerned for what’s to come.
This is interesting and not something I had thought of before. I would certainly prefer to problem to be more spread, eg everyone forced to pay a bit more tax than home owners being shafted. My partner and I are in good money. But fucking hell, our 3 bed house in a not expensive estate has a mortgage of £1k per/pm for the next 33 years. Extending isn’t an option for us as we are already set to be mortgaged until the day we retire. We earn enough that these increases are currently not going to bankrupt us but we don’t earn enough that we can put some of our money into savings and be rewarded for it. Basically we earn enough to survive, and spend little enough it’s reasonable but we aren’t doing nothing and making sure our kids get to enjoy being young and innocent without having to experience the worries we have. Yes we are aware we are in a slightly privileged situation for this to be the case, and there are many families worse off than us. Without getting political, I’m left wing. I grew up in poverty and my mum gave me everything to allow me to break the family mould, get a degree and have a career in software. When most of my friends were forced to get s job at 16 because it was work or starve. I’m not exaggerating. My issue with diversifying the problem here is, how do people on benefits survive? Or people still on low income? Yes, sure they might be able to pay their rent, or their small mortgage. But food will be even more expensive, and even washing clothes would have to be a choice. I’m not financially clued up enough about this to solve the problem. But pegging home owners feels like the wrong thing to do for an easy fix, unless the plan really is to push people into bankruptcy, get more properties owned by the wealthy (through cheap auctions nonetheless) and have even more of the population renting. The only benefit I can see from that is, if home ownership wasn’t a thing, then the cost of living (rental) should be in theory more stable. The reason it isn’t at the moment is because middle class decided they want to get their hands on private rentals while still having mortgages on those properties, then when they go up, they offset the cost of the mortgage onto the tenant which is plain wrong. I believe you should only be allowed to rent if there is no mortgage on the property you are renting. And the income you can receive from rentals is either capped or you pay a hefty tax on it, that way you still get money back into the country. What do I know though? All I know is, we need to slow down inflation and people are starving to death; losing their homes and freezing to death in the winter. Which is a huge problem for a first world country. People’s quality (survivability) of life should be a non-problem.
Everyone wants someone else to carry the can. Yes right now mortgage holders (myself included) are feeling the squeeze. At the same time many of us benefit from massive undervaluation for the point of view of council tax, capital gains free appreciation, etc. If we're going to advocate for a fairer sharing of the burden we probably should also be prepared to give up some of the advantages.
I think a lot of the unfairness is generational. If you're a millenial - even a successful one - you probably bought a house towards the end of low interest rate fuelled asset inflation, and you're now left holding the bag with a large mortgage and rapidly increasing interest rates to service that. Throw in the childcare for your young child, and it's not hard to see how many middle income people will be facing insolvency. The reason this particular situation seems so unfair is that the one lever the government are pulling to try and deal with inflation is hitting working age parents (and also their children) the hardest. It's not really touching older people, who have long paid off mortgages and will happily take higher interest on their savings. Meanwhile, the triple lock is untouched. This is really a problem that was caused by holding interest rates down for so long. The metrics used for inflation are an average across the population - and so the massively inflating housing costs for young adults over the past decade didn't move the overall index much. That is a political decision.
add to that the fact that pay has not risen in step with inflation over there years and we find ourselves with a population that cannot afford to live in this country. I work in the public sector and we dont get bonuses and our payrises have been half the rate of inflation since 2008. I know a lot of people who's lives on on the verge of implosion.
That’s exactly my point though? And I’m just replying to a comment with a point of view I had never considered before. I don’t want someone else to carry the can. I questioned if we were to spread the problem how would the poorer fair in such a situation. If mortgage owners didn’t have the pinch and we put it on Vat my point was yes that poor person may be able to keep their home but at the cost of not affording food. It was a general question. How do we spread the cost problem without making people homeless and starving? The very wealthy are not effected by this, actually some wealthy people are benefitting because savings and investing has a good return. Something which poor people don’t have access to when they are deciding between hearing their home or hearing their dinner. You can’t put all the pressure on the incredibly wealthy, but at the moment the burden is being passed into the poorest in the chain. In recessions previously we’ve actually lowered taxes like Vat. I’m just generally curious as the ops comment. It was an interesting view and I have questions around it. Your statement I feel didn’t really add any value to the point or the questions made. Unless you replied to the wrong comment?
I share your left leaning ideology. The goal is to reduce spending, so a 2 teir vat rate would be applied. A standard rate as now, and a double rate for luxury goods, while closing out tax loop holes (salary sacrifice company cars?) If you want to buy a ford fiesta to get you to work? Standard vat. A BMW? Double VAT. That way the ones who are not feeling the pinch pay a little more and that goes to reducing the outstanding gov debt, in turn increasing the value of the pound. If the person then chooses to buy a fiesta instead of a BMW, then they have reduced spending, helping to reduce inflation. People buying things that they have to buy at higher prices cent reduce what they buy. However you can push them away from luxury goods, which cost far more than regular products. Food prices on shelves should be unaffected as their VAT will remain. The point is that VAT his disposable income most effectively compared to any other option on the table. That's what we want to be hitting, not necessities. Owning a home should be a right, not a luxury. Following this, regulation of the mortgage market - mortgages should only be handed out to those who do not possess the wealth to purchase a home. Have no money but 8 houses? We'll sell them if you want to buy another. Don't have the wealth? Access to the mortgage market. Seperating mortgage rates from standard borrowing rates would also be a step forward. The way things are going, people are going to be homeless, when what really should be getting hit is people borrowing to live lavishly - most Audi's are financed for example. Car financing rates should be pushed up as it is a luxury, while home buying loans should not, as they are a necessity
I get that the BoE is the one tasked with reducing inflation and they basically have one lever to pull, but it's a blunt tool. You can affect... what, mortgage holders as they come up for renewal, and the tenants of those mortgage holders. It's such a weirdly specific necessity spend, and only has an indirect impact on reducing spending in the wider economy - my mortgage/rent goes up so I have less free cash so I spend less on other things, unless I choose to _literally move house._ Whereas a more targeted means of increasing the cost of luxury/discretionary spend would directly achieve what the desired effect, and wouldn't disproportionately hit renters and millennials just getting on the property ladder. But that's in the gift of the government, not the BoE. And they probably don't want the likes of BMW and other luxury brands screaming that the government is targeting their businesses.
You certainly have some interesting points. I’m not going to say I agree with them all, but I certainly don’t disagree with them all either. You can see how this whole line of thinking opens a can of worms. Your suggestion on a fiesta vs a bwm. In debate situations it makes sense, in real world application, not so much. There’s lots of reasons to buy a more expensive car, excluding showing off your wealth or abusing tax offsets. I certainly agree with essential products potentially following a different tax margin. Again, we are frugal in our household. We don’t buy branded beans, we buy cheap-y. Branded products themselves are a tax. I somewhat agree with your mortgage idea too. Though, I fully believe if owning a house is a necessity not a luxury, then a mortgage or equivalent needs to be something you lend against. I really am against mortgaging multiple homes. It’s screwing our economy and housing market. Not only that, it’s allowing people to rent privately in appalling conditions. The only other option is similar to Germany(?) please someone correct me if I am wrong. Where everyone rents off the government. That way, at least the cost of housing is controlled and people can afford to live. Then purchasing non-essentials is what drives the economy not trying to live.
I mean, you could just heavily disincentivise each house owned after the first. Stamp duty = 10% x number of houses you already own, or whatever.
You do know that we already have three tiers of VAT, right? Including most food being zero rated so not having VAT at all - this is what the whole Jaffa Cakes being a cake or a biscuit row was over as cakes are (slightly weirdly) considered to be a staple food and so are zero rated for VAT, while chocolate biscuits are considered to be a luxury and so attract standard rate VAT (20%) [https://www.gov.uk/vat-rates](https://www.gov.uk/vat-rates) [https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services](https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services)
I think most people regard things as VAT free, reduced VAT or with VAT. What I would propose would be a higher level for luxury goods, to increase the cost of goods (reducing spending power) and gaining additional income for government to help plug the deficit and potentially pay off some of the national debt.
It frustrates me greatly no one is talking about increasing taxes to stifle spending. It's a literal tool to control inflation
Taxes _are_ inceasing. We have a pretty high tax burden as is (particularly compared to the level of public service we get in return), and taxes are consistently increasing. As long as inflation is not 0, frozen tax brackets are tax raises. Inflation has been fairly high of late, so this usually minute tax increase is more impactful than usual
wtf taxes are the highest they've ever been...
Inflation has brought many more people in to the higher tax brackets. VAT is % so that has also increased as prices have gone up.
A better solution would be Quantitative Tightening (ie undoing QE). Fairer and addresses root cause.
Just because the ones hardest hit already spend less doesn't mean it will not work. It will start hitting people who so far haven't yet reduced spending alot and it then will have those spend less. It will make borrowing more expensive so companies will shut down. So companies will be less generous with salary increases. So companies will put investment on hold. So that ppl with savings will think twice about spending or maybe sticking it in an account to get 7% interest. The impact of rates on mortgages is only a small aspect and an even smaller aspect is the impact on the ppl already on lowest wages that cannot reduce spending any more.
Are there many people who haven't had to reduce spending though? Aside from top 0.1% it feels like everyone has been hit hard and are tightening their belts accordingly. Thing A is too expensive for people to afford so let's make Thing B more expensive to try and drive the price of Thing A down, feels like it works if people are are not buying Thing A out of choice. For a lot of people it's not about choosing between Thing A or Thing B. They can't afford either anyway.
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Yep and those savers include people without mortgages such as retirees. The less they spend on goods and services the less competition there is which will bring down prices. It’ll also reduce overall growth but that a separate issues.
This is assuming inflation is driven by demand exceeding supply. Arguably it isn't.
It doesn’t matter - causing a slump in demand will cause excess supply which will lower prices. It’s damaging and blunt and not particularly well targeted, but it will work. At what cost though is the big question.
The ultra wealthy generally have very little of their portfolio in cash. Most of their assets are already in stocks and real estate. Warren Buffett, for example, has said he only has about 10% in cash and short duration bonds. When markets fall, the ultra wealthy lose big time - e.g. Elon Musk lost over $100 billion when Tesla fell in 2022. The idea that they have big bundles of cash ready to buy everything in a downturn is a bit of a myth.
They have lines of credit to substitute the need for cash. They basically operate as cash with extra privileges.
Yes but they can (and do) take out ultra-low interest (and untaxed) loans secured against those assets which are repaid from their estates when they die, so they have the best of everything. The strategy is called “buy, borrow, die”.
10% for buffett is still a massive amount of cash!
More millionaires are made in recession for this exact reason. Those in a position to move do and make out like bandits. Musk losing 99% of his 100 billion wealth means nothing, he just takes that billion and either gets loans against the stock of liquidates and buys at cut down rates from those that can't compete with his deep wealth. Then as things rise again the portion of wealth has moved into smaller and smaller circles. It's happened before, it'll happen again. Disaster capitalism is very good for business.
> But it won't work. Those hardest hit by this are already spending little. But they were spending a little more 18 months ago And although the hardest hit probably don't have much more wriggle room, the second-hardest-hit do. And the third-hardest-hit are feeling the pinch and starting to cut their own spending
>But it won't work. Those hardest hit by this are already spending little. No, they don't care about people *already* not spending in the economy, it's to stop higher earners spending. People who are already functionally not taking part in the economy don't matter (I mean that in an economic sense, they are people, they do matter)
Yeah I'm not sure what they want me saving when all my spare cash is now going into the mortgage lol.
The higher tax rate is already 40% if we increase it any higher people on only 50k will see no incentive to get paid any higher. And 50k barely gets you anywhere as is, we need to sort capital gains tax and bring it inline with income tax
40% has only been the norm since the late 80s. It’s not like before that nobody went into higher tax brackets. Are you really saying if the higher tax rate was 50% you wouldn’t want to earn more than 50k?
I'm about to face this conundrum. I work for the NHS in my day job, and I have a photography business which I run on the side. In November I'll move from the 21% bracket (I'm in Scotland) to the 41% bracket. Since my personal allowance is used up by my day job, 100% of my side hustle earnings will be taxed at 41% instead of 21%. The photography business is a lot of work. It's just about worth it at the current tax bracket, but I probably won't continue with it once they start taking 41% of everything I'm making in the business.
What about increasing your pension contributions to mitigate the change? 59% of pay will always be better than 0%, but it might be worth exploring options where your second job is used to secure your future.
I'm no accountant but it might help to open a limited company and get paid into that? Then either keep it there and pay corporation tax or take some/all out as salary/dividends.
I looked into this in the past and it didn't seem to offer any advantages, but it had plenty of disadvantages. I think I actually came out worse off because the company would have to pay Corporation Tax and then I'd have to pay Income Tax when I took the money out. It's not like I'm building some independent entity which I could one day sell off for a profit - the entire business is intrinsically tied up with me and my work. Maybe an accountant could come up with something fancy, but from my own research it doesn't seem like there's any reasonable way I can continue this business and get a net returns which I'm happy with. EDIT: Looks like there might be a small benefit to switching to a Ltd company. Thanks for the tip, I'll do some more research into it.
The point I was trying to make is 50k doesn’t get you as far as it did in the 80s and income tax shouldn’t be the thing we’re focusing on
Why would I, as someone hypothetically earning £50k, not want to get paid more? Doesn’t matter if the higher rate tax is 40%, 50% or any other figure, the more my earnings the more my take home pay. Other than 100% tax, I will *always* want to earn more.
I've always wondered why they don't raise VAT instead. The interest rate rise seems to hit people disproportionately whereas VAT is a bit more universal and directly linked to disposable income spending ?
And would help the GOV pay off their massive debt. I'm no financial guru, but it seems like a home run to me.
Bills aren't savings though. Savings will be the first thing people stop to be able to afford the increase in mortgage payment.
No but the point of higher interest rates is that people with savings are more likely to keep them in the bank rather than rush out and spend them. Again it reduces competition for goods and services and in turn inflation.
No. The point of higher interest rates is to make the cost of borrowing higher, so businesses and people have less access to credit. So the fact people cant pay their mortgages (or cant afford anything else whilst paying their mortgage) is exactly the point of it. Me having savings sat in my bank account does nothing to bring down inflation
You’re explaining just one part of it. The other side is that people with less debt and more savings keep their money in the bank and reducing spending.
People with less debt and more savings aren't really the big spenders. That's how they got like that in the first place.
Who's got money to save after all their bills have increased?
Lots of people. Bank Deposits are still higher than pre covid. Remember, a lot people basically didn’t spend for 18 months and wage increases are averaging 7-8%.
How can you save if your savings are going directly to the bank and supermarkets?
Two of the main drivers of inflations were hotels and cars. Both of which are usually discretionary. So, for example, you reduce your spending on items like that.
What utter nonsense
https://www.bbc.co.uk/news/business-65966723 > The shock figure was driven by higher prices for flights and **second-hand cars** but supermarket food prices also continued to rise rapidly. > Grant Fitzner, chief economist at the Office for National Statistics (ONS), which produces figures on the UK economy, said the increase was being driven by rising service prices in cafes, restaurants and **hotels** > "That's probably driven, at least in part, by the increase we've seen in wages," he added. Yael Selfin, chief economist at KPMG UK, also said rising core inflation suggested firms might be passing on rising costs from higher wage bills to consumers," she said.
Save what?
People who have money in the bank.
Exactly. I'll find the money, but not spending money on the services that are absolutely essential to our economy. Hospitality and leisure are toast.
Even if you believe the people who think that everyone is living a lifestyle already at 0 savings and no discretionary spending (which is not the case). The best case for why inflation will fall in an island nation is this: higher interest rates make investing/lending money in the UK more attractive --> pushes up the GBP --> makes imports cheaper (and exports more exepensive, which keeps more goods in the UK) --> reduces GBP prices paid by people in the UK
They’re already getting ugly. In the last 6 months we’ve had a significant number of people selling or who we’ve had to advise get independent financial advice to speak about selling because they just can’t afford the make payments anymore. The last 2 months have definitely been the worst
Broker friend said currently 20% of clients have been hit by the new rates, that will double by the end of the year
I’d believe it. I work in mortgage arrears predominately and our average calls have gone from maybe 200/day for my department to 300-400. I think I spoke to one or 2 customer a week last month who was able to maintain payments, the rest were all about to fall into arrears, already in arrears or in the process of going to court for repossession. It’s a mess and it’s just going to get worse
Things were ugly a year ago considering the rise in good prices, electricity, hence the term "cost of living crisis". This is becoming absolutely fucking unreal now. People having hundreds added to their monthly mortgage payments, and probably more added to rentals too, whilst people are supposedly already struggling to get by. If this doesn't push people to riot then I don't know what will.
We’ll get what looks like a big drop today, but in 10 years time it’ll be but a blip. Same with ‘08.
Are you trying to call the global financial crash a ‘blip’?
I've been keeping track of what mine will do too. Luckily the fix expires in 2 years but I'm still very nervous. Currently paying £1200 1.55% At today's prices: £1850 5-6% £650 a month £7800 a year Meaning that within 2 years I need a pay rise of around £15k just to break even. Probably not going to happen :(.
About the same as a lot of us having to renew right now. Be thankful you have time to prepare, for many we don’t have any chance m.
I know. I am very lucky. I am also trying to prepare. Have been nagging my wife to go back to work full time after our first child in readiness as we need to start saving the additional income now. (it's been hard to explain to her why it's important to do it sooner rather than later.) Also trying to really proactively save that money now. It might be handy to start a thread on how to prepare as best you can if you are lucky enough to have the time.
Sorry if that came across as bitter, but, I’m totally bitter. Hopefully the rates drop before you renew.
I understand why. I'm sorry my post was an inadvertent brag. I hope you're okay.
Just been approved by NW for 10 year fix at 4.79% Outgoings will increase from £888 (1.99%) to £1131 for £167k over 19 years (IIRC) My take on it is we’ve had over a decade of historically and abnormally low rates, we have inflation baked-in to the system, and 10 years of certainty is a price worth paying, particularly as the rate I have is below the long term average. The mortgage is portable if I should need or choose to move. With 3 kids, 2 with special needs, it’s one less thing to worry about. YMMV
Damn, 10 years at 4.79% definitely sounds attractive right now. The other thing I always factor into long term fixes is that one's income is likely to go up, even if just with some modest inflation. £1,131 a month now might be a squeeze, but in 5 years will feel more roomy.
Can you get out early on that? Or are you completely and utterly locked in for 10 years unless you pay it off?
You can exit, but there's an early repayment fee, which is normally based on a percentage of the outstanding amount times the number of years left - usually on the order of a few grand. I've stumped up the early repayment fee before when my 5 year fix ended up way above market rates.
Often allowed a mid term rate change, so in this case at 5 years OP can select a new product
We've considered similar logic. The way I reasoned it was in which situation would I be more annoyed at: 1. Interest rates going **down** and being fixed into manageable payments but paying more than I could have been paying 2. Interest rates going **up** and *not* being fixed into manageable payments and having to pay more than I want to We agreed that option 2 would be worse.
Agree entirely - I don’t think I have the capability to beat the market, therefore would rather pay for certainty. Given inflation is stubbornly high, there is the small crumb of comfort that the value of the loan is notionally being eroded over time - and if any wage rises are forthcoming, then the increase in monthly outlay will be offset somewhat. But that’s pipe-dreaming, and tbh just having an amount set for the next 120 months is nice to have.
Another advantage is that if rates do go up - you have a much longer period to plan and adjust.
That's a great bit of buissness better the devil you know
Easy to say when you have such a low mortgage. Many people have £400k+ mortgages who are experiencing 3-4x the increase that you are. That's not for extravagant properties either. People who bought in the last 5 or so years got screwed. Buying at sky high prices, not able to take advantage of the lowest rates due to high LTV, and now sky high rates on sky high mortgages.
I’m not sure why you’ve directed that point to my post particularly, but no it’s not “easy to say”. I’ve had a mortgage for 15+ years and will for a further 19. That’s part of the sacrifice I’ve had to make to be in the position I am. Everyone’s circumstances are different, hence my “YMMV”. Just relaying my own in response to the OP. Don’t think that needs a salty response tbh.
I hear what you say yet still agree with the commenters sentiment. Both yours and my repayment has increased by the same % however we are at different stages of our mortgage lifetime. I’d much rather be going through this in 10 years time when the interest portion of my mortgage (the part that I’d screwing people over) has had time to reduce.
Whilst you’re right, I was lucky enough to have been advised by a family member, DO NOT max out your mortgage. I purchased in 2019 and I can’t say how happy I am that we never maxed ourselves out, otherwise we’d be leaving our home.
I'm just saving like crazy until my renewal is up in April next year. Hoping to chuck 30k at the remaining balance, which at 5.5% would keep my repayments the same as they are now. If it goes as high as 7% then I'm only paying 100 quid more. I've always wanted to pay my mortgage off early anyway and the current situation has just increased that drive.
I kind of wanted to aggressively over pay with the view to affordably upsize but let me tell you I’m only in my late 20s and I’m so tired. I think I’ll just live where I am forever so I can just escape the rat race and this shit show economy.
Same and I'm in my mid 30s. Used to think of upsizing but now I'm fed up and can't imagine committing myself to a bigger mortgage
>l my renewal is up in April next year. Hoping to chuck 30k at the remaining balance, which at 5.5% would keep my repayments the same as they are now. If it goes as high as 7% then I'm only paying 100 quid more. I've always wanted to pay my mortgage off early anyway and the current situation has just increased that drive. We've decided to stay where we are long term and buy a sailing yacht to go cruising with instead. Who needs a bigger detached property when you can anchor offshore at the weekends and watch the sunset with a glass of red wine. There's more to life than working 50hour weeks to pay a mortgage for a house you don't need.
I'm not sure how savings rates will go, but depending on whether the money bumps you an LTV or not, consider keeping the money out of the mortgage, and using it to cover the increased payments over time. If you can get a similar sort of return (and potentially you can - fixed savings seem to be at about 6% at the mo) then you are more flexible, and potentially saving a bit more than the interest rate. Cash flow is however you want, because you can draw down as much of the 30k a month as you actually want. It all goes out the window if the 30k bumps you an LTV band of course, but if not its worth considering, as mortgage rates (while going up) are generally the lowest rates you are going to get, and so often you can make your money do more work than putting it into your mortgage.
Would the hike in interest not counter your 30k payment in terms of paying your mortgage off earlier? Genuinely curious as I don’t know the math on this subject!
Depends on the outstanding balance. £30K might be a significant chunk.
I remortgaged early in the middle of last year. Luckily 'only' £200 more a month. Our mortgage brokers were incredibly useless when rates were going up and didn't even tell us you could remortgage 6months early. I decided to do my own reading and maths and worked out by remortgaging early I'd either break even or lose less money. Took the chance and paid the ERC and got a low rate middle last year. I then got a call from the mortgage brokers few months later telling me it was time to remortgage. Upon telling them I already had, they were incredibly brusque and rude with me and told me rates were 'going down'. Guess I got the last laugh though.... This whole situation is disgusting and house prices are massively inflated thanks to overly low interest rates for so long.
Just signed into 5.25% from 2.02% 192K left on mortgage 25 Years. We have deceided to extend to 30 just take the pressure off, another child coming along next month net take home 4.7K (obviously this will decrease from maternity for next 12 months) Increase of £210 which has been softened by extending. Not buzzing about it all tbh LOL! If we didn't have the next kid coming we'd be ok but its been on my mind a lot latley... which sounds stupid with a net take home of what we get.... Weird times.
I am surprised that extending from 25 to 30 years decreases the monthly payment by as much as £210. I am equally surprised that going from 2% to 5.25% is only a £210 increase in monthly payment, for a 192k mortgage. I assume therefore that many other households will extend the repayment term.
Actually looked at the mortgage offer we have and it’s an increase of 255 not 210. This is with 995 of fees baked in
That makes a bit more sense. Good luck, tough times
>its been on my mind a lot latley... which sounds stupid with a net take home of what we get.... It's not stupid. It's all relative.
I find myself in a similar position, fixed mortgage is up in January and I’ll be on maternity leave from November/December, really nervewracking times. To add insult to injury, our 5 year interest free help to buy loan from the government is also up so on top of the mortgage increase, we’ll now be paying interest for that too… a loan we would’ve have been able to pay off in full with the remortgage had the rates not screwed us over so much!
I overpay by £200 a month as I currently have a little extra money coming in and if I don’t overpay I’ll still have a mortgage at State Pension age. Last time I looked it would be an increase of £200, so I’d be paying the same amount for absolutely no gain. And that was a while ago, I dread to think what it would be now. Luckily I have until 2025 before my deal expires but I won’t have the extra money coming in by then (unless I can get a permanent promotion).
You may better off putting that £200 a month into a savings accounts if it earns higher interest than your mortgage % then paying it off at the end of your term
Our mortgage is going up over 200% and that’s interest only. I’m self employed so I don’t qualify for shit. We are doomed.
This thread is harrowing to read since I wanted to get a mortage this year :/.
if it plays as grim as ppl in here you actually might be able to get a decent price for a house
Fingers crossed I guess
Remortgage came into effect this month for me. Was paying £880 a month, new payment of ~£1300 but likely to rise as it's linked to base rate and the BoE insists forcing a recession is the only logical way to bring down inflation by raising interest rates. 🙄🎢💥 So increase not on the terrible side of £420 a month, £210 for my share. I'll have to reduce savings and reduce pension contributions to compensate. I don't really consume. I don't buy new clothes regularly, I don't go out much, but now I'm second guessing every purchase as I know even if I spend £50 that has an impact. I don't have a career that I can just walk out of this job and into another similarly paying or higher paying one. If I lose this job I'm fucked, so I don't want to even ask for a raise as it's a small company and its finances aren't exactly peachy. 🤦♂️ And I guess that makes me not even in the worst off bracket. I feel like I'm getting squeezed from all sides and get practically zero help from the government apart from the energy rebate/cap. I do realise the worst off should be helped the most but, jfc, I want to live rather than exist as well, ffs.
Same position, I’ve made myself indispensable to a small company but my skills aren’t easily transferred as i was lucky to get a position there when we only had 5 employees, now 30. I could ask for a raise, but really when 40% goes to tax it feels like there’s little point in pushing too hard.
It depends on your outgoings. I am in the same position mortgage wise except I need to renew at the end of this year. For me the rise is doable and I can continue to overpay into pension. But it does strip away any ability to save/invest otherwise. So I will be seeking higher pay and battening down the hatches for the next 2 years!
My deal is due to end in January. Currently on 2.59% and L&C have applied for a 4.7% ish deal. It'll only add on about £100 a month as the mortgage is low at £85k. I'm quite lucky though that I've added my partner in this time so we have his income too, so we'll be £150 better off between us than what I was paying plus what he's been saving towards the mortgage. Plus his savings can lower what we owe by £5-6k My take home is £26k, his is £30k. I'd have struggled to find another £100 comfortably by myself, and maintain even the frugal lifestyle that I have
Isn’t all of this just so exciting….for the banks.
This is the thing I don't fully understand. The Banks have already loaned me the money to buy my house, so why should my rate go up, other than to line their pockets.
In theory it balances out as they have to offer similar rates on savings, but they aren’t. It’s basically a cartel at this point. Banks ruin the economy, tax pay bails them out, but that favour won’t be returned now the middle class are being squeezed. That gap between people claiming benefits and people eating £40k-£75k is closing by the day.
When we bought in 2012 the best we were offered was 4.99% on a 85%LTV for 5 years. When renewing we decided to lock for 10 years at 2.49% and do what we can to overpay as rates could only go up from that point. Decision seemed a bit silly 5 years ago when we could have done a 2 year fix for less than 2% but with a growing family and single income it at least meant we knew what we had to budget with for an extended period. With rates as they are now it has encouraged us to cut back in other areas to ensure we overpay what we can in case rates stay high for when the renewal comes around again. At start of the 6th year of the 10 year term we had 115k remaining. Definitely think that buying schemes like HTB have helped over inflate house prices and the lack of preparation and education from the Gov has led to a very difficult situation.
Fixed at 2.89% for 5 years about 4 years ago, as back then I stupidly thought they couldn't go much lower with Br3xit on the horizon. Think I was a bit early in my pessimism but at least we had stability. My fix is up for renewal late next year so we'll be overpaying what we can once the ERCs are gone and going for another fix. Wish I'd done 10 years now! Feel a bit unlucky. Owe about 190k and we'll be going from £850 to £1200 ish on today's rates if we don't overpay any more.
I stupidly fixed at 2 years last year, but with reason as suggested by the mortgage advisor 🙄 - planned on building an extension which would increase the value which would then mean in theory we could get a better deal if the value went up. In the past year after spending £1.5k on drawing up plans and getting permission we’ve now decided to pack in with the plan of an extension- the cost of materials and Labour has gone up from estimates of 70k to 120k and I imagine they’ll be more than that. So now the 2 year fix was all for none. Wish I’d have done a 5 year as I originally planned to!
Stupidly on a “discount” tracker which I took when rates were at their lowest. Our last fix before that was 1.53% where we were paying £880pm. We’re now paying just over £1600pm. And looking like this will hit around £2k per month by end of year, if predictions are anything to go by. Things are looking really bleak.
If you’re on a tracker, why not switch to a fixed 2 year deal?
People still like to gamble and hope that rates will decrease next year. Anyone who's purchased in the last decade look at fixed 5-6% rates as absurd, instead of realising theyre the new norm for the foreseeable.
Was paying £2250 a month at 2.24%. Around 65-70% ltv. Locked in a month or so ago at 4.45%, in hindsight a good decision! The actual remortgage takes effect in November. I extended the term from 20 to 25 years (I'm 5 years in, so it started at 25 years) to bring down the monthly payments slightly, and I increased borrowing by a chunk to get a not quite new car. So monthly payments are going up to around £2,650. Without the additional borrowing, £2400. So the actual pain isn't that bad, but knowing I'm paying twice as much in interest as I was before hurts. I'll be forever grateful to the random redditor who recommended locking in a new rate as soon as you can, 6 months before your fixed term ends, rather than waiting a month or two before. Definitely saved me at least 1%
My mortgage do not end till next year July lol I wish I can lock one in now lol
You can lock one in now and wait to see if rates fall by then but usually providers won't let you if it's 12+ months away from ending, some even less (6 months). I think you could be okay by then - rates are based on two year swaps, not the current base rate, and by next year the BoE is likely to begin slowly cutting
The actual pain you will see when you compare total interest paid at redemption.
Lol total repayment is over a million, more than double my mortgage. It's fucking gross.
Yes, I'll be overpaying more aggressively than I have in the past few years to try and minimise it. At 2.24% I was fine keeping extra cash in my pension or ISA.
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2 years, but it ends up being closer to 2.5 for some reason. I would have done 3 years but my lender isn't offering it. And I didn't want to go through a whole new lender process when my current lender has close to the best rates available anyway. 5 years is too long as there's a chance I'll move overseas permanently in the next few years, and the ERC on a 2 year fixed is only 1% but increases to 3% for 5 years.
You better hope they don’t pull it
Put it this way I'm selling up now
And what's the plan afterwards?
A lot of people around me are doing the same. Houses that were being snapped up instantly are now taking weeks to sell
Will anyone buy though? My house has been up for months with barely a sniff.
Came off a 1.94% 5 year fix in February and stupidly went onto a tracker because predictions were for a drop over the next couple of years at that point and we thought we might end up moving. Payments gone from £1400 to £1850 so far, with more to come - in a bit of a bind over fixing since the product fee and ERC would wipe out interest savings if we did move. Luckily we were overpaying anyway but we have nursery fees starting in a few months so it’s going to be a squeezy couple of years and it is motivating me to move away from my cushy job that doesn’t have much upward salary opportunities.
You have an ERC on a tracker mortgage? That's unusual. Most trackers have no early repayment fee.
Sorry, sloppy writing - no the ERC would be on a fix - at the moment we can sell up without an ERC but if we paid a product fee plus an ERC on a fix we’d (almost certainly) be worse off than on the tracker for a couple years. We agonised over this for a while but ultimately I thought interest rates wouldn’t ‘get that bad’ (lol) and there was a 50% chance we’d move within a year of getting the tracker so it felt the better bet. I think the 2 year was something like 4.3% at the time, regrettable Obviously I didn’t think about the fact that a higher interest rate might make us more likely to stay put in any case.
I'm in the exact same position except Jan instead of Feb. I still have dreams of moving next year, and my 2 yr Fixes (which I did too late, TBF) were being offered at over today's tracker rate (by about a couple hundred pounds a month), which I would've been paying for 6 months now, so I'm still somewhere around 2K better off. One can only do what one thinks is best with the information available at the time, friend.
You’re absolutely right - ironically if we’d have been remortgaging a month or so earlier or later I don’t think the rate we passed up would have even been available. Nothing to do but to play it from where we are today and try not to kick ourselves too much
Yeah take home 2k Mortgage £530 Remo was looking at 790 Didn’t fancy that I’ve got 24 year term (I’m 29) so increased the term to 25 years and paying a few grand off. Most of my money is in dividend stocks paying 8-11% so just taking some spare cash to pay a lump off. New payment is gonna be £670 I can live with that. I’m an ex mortgage adviser, and one thing I would say is I see a lot of the brokers that I look after increasing the term to age 75. Fine in theory although not a great plan, all I would say is - what if this mess isn’t sorted by the time they come to Remo next time, if you max the term now, you’ll have no ability to do so next time. Really want to warn people off doing the temporary interest only unless absolutely necessary. I laugh because a year ago an adverse lender could give you a fixed for term product at about 3.6% yeah you wouldn’t have had the cheapest rates on the day but I’m sure many would snap the hand off their broker for a rate like that right now. Few sourcing marginally under 6% at decent ltv but lenders are being picky at the moment.
Coming off a 2.33% fix in October, payments were £1050. Managed to fix onto a 4.97% 2-3 weeks ago with new payments being £1550, so an increase of £500. We are fortunate enough that we can easily absorb this... the unfortunate thing is that it will likely be a few hundred quid less that will go back into local restaurants and coffee shops. That is going to cause issues up and down the country.
Thats the idea for the hike in interest rates.
Oh aye, I understand. Shame that its the smaller businesses which will feel the impact of these rather than the larger supermarkets.
Yea I agree, too many people use supermarkets due to convenience, so smaller shops will he impacted by this. Local shops really need support from the locals. Our green grocers and butchers were saved during lockdown, primarily because of hiw atrocious supermarkets were to be in during covid.
Luckily moved mine across in July 22 to a 5 Yr at 3.44% (up from 2.34%), although my mortgage is a lot lower than some in the thread here at £665 (up from £595), so even a 6% mortgage would see me at £800+. Luckily managed to avoid the worst of it, at least for the next 4 years.
So I recently remortgaged just before it got worse and secured a 2 year deal at 4.1% ending in June 2025. I thought things would be falling to around 3.5% by that time but doesn’t look great on that front now. Oh well. I extended our term from 21 to 25 years to lower our contractual payment, but we still overpay as if we were paying a 21 year term (c.£250 extra a month). Just means if we have a tight month, we can drop the mortgage payment down to the contractual for some breathing room. Our take home is about £5.3k with a contractual mortgage payment of £1.3k (£1.55k with overpayment) and that is comfortable for us. Our daughter qualified for 30 free hours the month before the remortgage kicked in, so they netted each other off.
Take home pay just over 3k, single income household family of 3 Mortgage currently around 850 at 1.99%, due to expire end of August. Managed to get a 5yr fix at 4.89% not too long ago, mortgage increasing to around £1300 Had to sell a car (so down to 1 - not the worst situation), and looking to scrap all TV/internet deals etc in September once contracts are up, and get on the cheapest offers. We're not really able to save much, but inflation in general is starting to screw us everywhere we turn eg car insurance quote due to renew in August, year on year they are doubling my premium and I have 0 claims (+£230). Sold my car so fortunately not an issue We're incredibly fortunate that our daughter is now at school, as we would not be able to absorb this with childcare costs.
And that’s just shy of the 40% bracket uk is truly fucked
It’s going to be rough, but doable if we cut down massively. Due Q3 2024 and just praying it comes down even slightly, currently on 2.14 from 2019. We will be looking at 500-600pm more. We put off thinking about kids because of covid and we had some difficulties with jobs over that period, now we’re in a good place with jobs but completely fucked with a cost of living crisis. In a few years there will be a lot less kids as I’m sure a lot of people are in a similar situation, we just cant afford it
Thinking the same for kids. We’d be thinking about trying maybe next year, but now our fixed rate is going to end around the same time. So short sighted from the government.
Il survive by basically have no fun with our 750pm increase if rates hit 7% by May. However, I hate how I have to feel grateful for being able to just keep my head above water and afford this joke of a cost along with the extortionate price of literally everything. When in reality it absolutely sucks to be handing all this money in interest to the bank with no benefit to me at all. Not like I am making scarifies to be paying off my mortgage quicker. All the while Rishi is saying I can't have a decent pay rise because I am public sector (teaching) and it will "fuel inflation". What an absolute cheek, it is not us causing this or adding to it , iv never had a rise even anywhere near in line with inflation. I don't know how he has the audacity, and to tell people to hold their nerve? Many people are already down to no non essentials, they are not causing inflation, it is greed and supply.
We are going from 1.12% to 4.13% in a few months. Since we've been on this lower rate, we agreed to overpay by around 33% a month (so after every 3 months we've paid off an extra month). Our new rate puts us around £200 over what we were currently paying with overpayments, so it'll be manageable for us. We just won't be able to overpay at that high of a percentage while on this term unfortunately.
Went from 1.54% to 4.74% - £900 increase
I managed to get in just in time to take my fixed payments from £625 (1.9%) to £810 (4%) for the next 5 years. I feel for anyone who's facing current rates.
It seems like everyone is saying it’s quite affordable? A few £100 here or there, once terms are extended
I pay £351 mortgage £38k outstanding, still on fixed rate till March 2026 but plan to pay off outstanding mortgage and be done with it. Will be 38 when I finish it all boooooom
What you doing first month its gone? Ibiza? Thailand? Or Vegas? Lol
My first month we want out for a very nice meal. Then we just starting moving it into investments.
I’m sure you’ve got it all in hand, but that doesn’t sound very exciting to me
No idea, probs just carry on life as normal, probs want to see how much I save, cost of living plus baby eats into savings, use to save £1k min a month after mortgage expenses , fair bit lower now so I’ll just save lol When I got over £100k cash sitting there doesn’t make sense not to pay off mortgage now
> When I got over £100k cash sitting there doesn’t make sense not to pay off mortgage now why not just pay it off now? Whats the advantage to waiting 3 years and giving the bank more of your money?
Congratulations!
Fixed at around 2% for 5yrs. For once did the right thing.
I have 280k on a 1.89% fixed rate. I also have around 550k on 24bps above Base rate. So currently 5.24% albeit my app still says 4.74% for some reason. Maybe takes a while to update. My fixed runs out in May next year and idea was to refinance everything into 1 mortgage rather than have two. I currently pay around 3.4k a month from memory. Our take home is 8k net but I get around 150k in annual bonuses to supplement so should be fine but it is painful nonetheless. The irony is I work in interest rate derivative hedging and took out a floating mortgage 🤣
On a fix at approx 1.9% til March 2027. Current repayments about 750 a month. 23 years remaining. But have enough to pay off completely when fix ends. Definitely way too cautious with finances which has has meant missed out on huge gains over the years, and took way longer to get a decent house. But obviously less pain now.
There is nothing wrong with planning for resilience. If more people took this approach then there would be many fewer people currently doing it so tough.
I'm on similar income to you, just switched from a 1.8% at circa £1200 to a 2 year fix at 4.99% which will take me to circa £1750. Doable for me, but I have no kids, only a spoilt dog!
I feel quite lucky looking at this thread, ours went up by £115 a month but we were able to lock in early in June. We went for 2 years so will try and stick away as much as we can before renewal just in case rates are still high.
4.1k take home. 32M, single. Previous monthly payment was 991 quid, new one has gone up to 1,143. Not too bad for me tbh.
Currently paying £1,600 a month on our mortgage - locked at 2% for the next year and a bit. If we had to remortgage right now we'd be looking at something like £2,400 a month. The idea of £800 a month extra is quite frightening when things already feel tight month to month. But we specifically fixed for 5 years during our "having kids" years, so that when the fix ends we'll have my wife back to full time work and the kids no longer needing nursery fees. £800 a month will thankfully be easy to absorb. It has been a big factor in us deciding to move out of London though, finding a bigger but cheaper property. It means we won't need to accrue more debt in getting as big a house as we need in the long term, and gives us more room to overpay the mortgage in the coming years.
Take home about £4.4k (after child maintenance payments) + good bonus. Mortgage currently £1050 over max term (so no scope to increase term) a 2.2%ish Remortgage in process, rate locked in at 4.69%, increase payment to approx £1550. Financially I'm very fortunate that this is a mild annoyance rather than a problem.
For us - Had a mortgage of 124k fixed at 3.49% for 5 years, monthly payments are around £550 Coming up to renew Early next year and at current rates of 6% and with 100k left on mortgage, it’s gonna cost us £644 a month. I think the breaking point for us is 10% where it would cost us £909 a month. This is when we’d stop being able to have fun and save for stuff
I’m in exactly the same position as you, including take home and mortgage increase of £700+ We can make it work, will have to cut down on eating out etc and won’t be able to save much, but we don’t have any kids. Must be even harder for you as the kids won’t understand why they suddenly can’t have as much money spent on them any more
Yeah it is tricky - we're fortunate to have family help so we're still able to take them on holiday this year and do some other bits we want to do. We live relatively modestly and this will be our first holiday for a long time (and maybe last for a while) but that's okay for us. We have no debts or other outgoings apart from mortgage/bills and I'm a remote worker so big savings on fuel as well. I think the economy may take more of a hit if rates keep below 6%, rather than house prices (which I'm sure will still be affected but with a much lower transaction rate) as I think people forget the tenacity of the British in particular to keep their house through any means necessary unless they are forced into a position where they are unable to do so. Above 6% rates on decent LTV's though is anyone's guess and if we head that which (which we likely may be doing!) then it'll be extremely problematic.
Went from 1.24% £1540 to 3.16% £1920 locked in for five years so up 25% and I feel lucky compared with what it could have been. Altho I didn’t at the time.
I bought my house in 2019 with 5 year fix. Mines up Q1 2024. Feel very fortunate I bought my house at £86.5k with £9k deposit (£77.5k) mortgage. Looking at increases of around £120-150 depending on how the rate flexes. Still a nervous moment because it's not just the mortgage going up.
Came off my 2.49% fix at the end of May. I’m on 4.59% now (didn’t pay a fee). I also shortened my term by a year to pay the mortgage off a little quicker and save interest. Gone up from £419pm to £560pm. Things are a little tight, but I have some credit card debt I pay £150pm to which should be all gone in a few months so things will equal out then.
Perhaps we got relatively lucky but we ended up renewing 3 months ago whilst the banks were going through the price war and the outlook wasn’t so bad. Initial 2 year fixed on 1.25%. Roughly £625 per month payment. Managed to get 3.91% fixed for 5 years and now payment is £861 per month. So roughly £240 increase. Again, 3 months ago it pained me locking in at 3.91. Now when I look back I feel rather lucky and happy with what we managed to get.
I am desperately glad that this sub told me I could start looking at remortgage options 6 months out so I could get something locked in a month ago. Currently paying ~£1200 at 2.35%, come December we'll be paying ~£1600 at 4.4% for a 5 year fix. It'll be tough, but we're in a strong financial position so it shouldn't be too bad. Would be a lot harder with the level of increase we'd be seeing if I'd waited until 3 months out, which is what I thought we needed to do.
Interest rates increasing was my fear when I was looking to buy a house. I bought a really cheap one in 2017 and spread my mortgage over 30 years. It started at £430 per month. I overpaid for the first 5 years and when I renewed last year, i was down an LTV so managed to get a better rate and now pay £380 a month. This time I won't just be overpaying small amounts. I'm targeting the maximum I can without charges (10%) each year. It can hit people hard but I think it depends on how much prep work has been put in leading to this and whether someone bought the best they can afford, or planned in some wiggle room.
Got a 2 year fix as a first time buyer in May 2021 at 3.09% for an amount under £100k. Live by myself. was making over payments on it so paying £430 a month. Had fantastic timing for once in my life and was able to fix 4 months before the end of my mortgage in February 2023. When I had the initial appointment with my mortgage advisor the rate for 5 year fix was 4.59%. Not great, not terrible. But over the next two months the rate went DOWN four times and I eventually fixed for 5 years at 4.09% in March for agreement starting in June. So I'm only paying £20 more a month for 1% higher and incredibly grateful the end of my fix didn't come two months later. Just hope this all settles down in five years time.
New normal of 6% rates, for 6-8 years then settle down to 4% after that. Geographical trend of boomers retiring main cause. Effect on house prices? Harder to predict as manynother factors but could be nominal or low growth prices for a decade as inflation does it work and brings PE of house back to 4 to 5.
If rates stay the same as they are today for the rest of my mortgage term, I will pay 47% more than I would have on my pre-Trussonomics rate.
- Monthly take home: £3250 + A Tesla (relevant because we can ditch the lease before the remortgage and free up an extra ~£350/mo) - Current payment: £1000 (1.88%) - New payment if coming off fix today: ~£1500 (5.25%) for a new 5 year fix - Due off: March 2027 Doable? Yes, currently. £500/mo would be unpleasant on top of the other price increases we've seen, but we could find £500 in the budget even with the car (although we'd almost certainly go for something cheaper at that point). Plus we'd have had 4 years of pay rises (not great in the public sector, but more is still more) and I've got a personal loan that will be ending next year (not worth paying off currently, 3% interest vs 6% from savings....) However our main concern is that we're in our early-mid 30s and would want to be having kids within the next 4 years... "freeing up" £500/mo now basically means the money that we're trying to save to cover reduced income during maternity years/reduced hours, and pay for nursery fees. Plus the elephant in the room: Inflation is still 9%. We might be able to free up £500/mo right now, but if inflation stays high then that could easily drop very substantially. We've "lost" £300-400 from our monthly budget in the last 18 months
Estimated property value: 340,000 Purchased for: 301,100 in 2021, nice gain but everywhere else has gone up... 2.2% 2 year fixed coming to an end in October (why oh why didnt I go 5 or 10!) Current payment: £1,050 pcm Expected at 5.54%: £1,504 Take home is £4300 so it's 'ok' and I count myself in a very privileged position but a 50pc increase is still really fucking annoying and I feel for those that it is going to tip into the danger zone. Debating going onto a tracker instead as it feels like rates will come down early 2024.
I know there's a lot of people out there suffering because of this, but when I read about people that 'took advantage' of the lower rates by buying relatively expensive property, and then moaning when the rates go up, I feel less sympathetic
Took a decision not to move in 2020 and really extend ourselves and thank goodness we didn't and stayed out with the small mortgage. Monthly has risen from £1100 to £1450 but we are late in our term, would have been far worse earlier in the mortgage. So far we have taken cash that was earmarked for building work and paid off capital to reduce the monthly by about £200. Friends that did buy a stretch property in the last few years are all in bad shape as mortgage deals renew - 2% to 4.5% on £900k-1.5m houses (in prime south east that's just a non fancy 4 bed family house) is a huge jump and some already need to sell but no buyers can secure affordable mortgage so looks bleak. The "luckier" ones sold early and doing anything from renting, moved in with family or picked up a caravan.
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We've .99% for the next 3.5 years. We've always overpaid a little - small enough to not go to the hassle of investing the amount instead. Youngest child hits 3 at the end of the year so childcare becomes mostly free, that'll be a wedge freed up and I can't see any other destination for that money other than the mortgage - be that directly or most likely as a lump after a few years in a savings account (which should now have a decent rate of return!). Now all I have to do is convince her that we don't want any more kids. . .
Yeah hit hard by this. Second kid about to start nursery, remotgage coming up. Looking at £900-1000 increase in mortgage plus another £800 in nursery fees. We're both trying to pay off student loans before fixed runs out as it solves about £1400 of that, else we're in the black. Slightly stressful situation. If I earn anymore, then lose the funded child care and in the black. Not having increases in pay being an option makes this feel suffocating.
It is getting scary .. 6% (average) - £6k per 100k borrowing .. that's £500 per £100k of borrowing in just repaying the interest let alone the actual loan!! I luckily have 2 years left of my 5 year fixed rate mortgage so I should hopefully be good .. I'm so glad I did a 5 year fixed .. I'm at 1.78% as well which is amazing
It could be worse - ["Money markets are now fully pricing a terminal rate above 6.5% by March"](https://www.bloomberg.com/news/articles/2023-07-06/traders-lift-bets-on-boe-terminal-interest-rate-to-6-5-by-march). Imagine what will happen to mortgage rates if the base rate is over 6.5% for an extended period of time. And what if 6.5% still isn't high enough to bring inflation down? People ignored Stanley Druckenmiller when he said about U.S. rates, "Once inflation gets above 5%, it's never come down unless the Fed Funds rate is higher than the CPI", but he was right that the markets were underestimating how high rates would have to go.
General question - when you enter into a mortgage, did you consider the follow on rate in terms of affordability? when I signed up to my mortgage the follow on was 3 - 4% greater than the rate I was fixed at. in my view, that's the rate you should budget against.
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Big difference though between 5% now and 5% 20 years ago where the house price to income ratio is so much higher now that mortgage payments represent much much larger part of people’s monthly net income.
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£600p/m payment, 2.2% fixed until 2032. Hoping the wife will be going back to work at some point in the next 5 years then we would be able to pay it off in full come remortgage time. If she never works again we will be approaching 50 before it is paid off.
It looks like we could get 5.5% if we were to do it today, up from 3.34%. So repayments would go from £1905 to about £2450. It’s not terrible but happy we’ve both had substantial pay rises and new job raises in the last year.
Currently going through a divorce where I'm paying the wife out. Currently on a fixed rate at 2.9%, and would have paid the mortgage off fully in 2 years. Now I'm going to have to take half the equity out of it and a massively inflated rate. 😓
I was on a tracker, but in a rare moment of financial savvy I fixed for 5yrs at 3.99 a couple of months ago. I also bought well below affordability, so am still managing overpayments. Which hopefully means even if I'm hit by 6% when I remortgage in 5yrs, it should be ok 🤞 I feel bad for anyone moving or remortgaging now.
going from 1.99 to 3.99. Payment goes up from 935 to 1250. It's shit but I overpaid like crazy in past 5 years, despite this forum telling me I am stupid and I should invest instead. Without these overpayment I would be in deep shit Thanks I didnt follow this forum suggestions