‘I’m really worried’: homeowners and would-be
buyers on UK interest rates
As the base rate reaches 4%, we hear from people
concerned about rising mortgage costs
Jedidajah
Otte
Fri 3 Feb
2023 07.00 GMT
Chris
Felix-Hill, 47, and his wife, Adeline, from Steeple, Essex, are struggling to
keep alive their dream of one day becoming homeowners, after “demoralising”
house price rises during the pandemic and yet another interest rate rise from
the Bank of England on Thursday, to 4%, a 14-year high.
“Today’s
announcement just means more disappointment and frustration,” says Felix-Hill,
who works in the adult education sector. “We’ve been saving for a few years and
fortunately can live with my mum and her partner, which has allowed us to save
up a £30k deposit.
“However,
we couldn’t keep up with rising house prices last year. We found a property for
£299,000, but because of higher rates and the cost of living, the amount we
were allowed to borrow was slashed from over £300,000 to £262,000, so we
couldn’t get it.”
Prices in
the area have not come down much, he says. Instead, sellers unwilling to lower
their prices have decided not to sell at the moment.
“There are
a few properties within our price scope listed here, but I’ve looked at Halifax
mortgage deals today, and with current interest rates of around 5.2%,
repayments for a £300k two-bed would be around £1,600 a month, and rates could
go up further.
“I’m nearly
50; in a few years’ time, I won’t be able to get a mortgage. I have a good
degree and we earn just under £30,000 each; you’d think this would be enough to
get a two-bed cottage of your own. It’s just depressing. I’m really worried I
will have nothing in the future.”
Stephen, an
IT professional in his late 30s from Hampshire, said the latest interest rate
rise had cemented his and his wife’s fears that the mortgage repayments for
their two-bedroom property would rise dramatically this spring.
“Our
two-year fixed rate of 1.4% expires on 24 March. With the Bank of England
having raised its rates to 4%, we’re looking at an increase to about 4.28% on a
two-year variable rate, raising our monthly payments to around £1,500, from
currently £880,” he says.
“We have a
household income of around £80k, but we’ve stopped saving and will have to
effectively put our lives on hold to get through this. We were hoping to do our
honeymoon this year, which is now unlikely, and these extra costs mean it’s
also becoming less likely we’ll have children. If rates don’t come down, we may
have to move to a cheaper part of the country.”
For Philip,
42, a police officer from Horsham, West Sussex, the Bank’s announcement means
his family’s mortgage repayments will rise by 50% soon – and become
unaffordable unless he and his wife generate higher earnings.
He has to
refix his £260,000 mortgage by the end of March, and is looking at a
provisional rate of 4.9%, which would add £500 to his current payments of
£1,050 a month.
“The
increase from our current 1.5% is eye-watering, and adds to our overall sense
of financial insecurity, especially with bills rising also. Our household
income of £85k is not enough to keep paying our mortgage. We’ve got two young
children, childcare costs and no financial wriggle room,” he says.
“We’re
unlikely to meet payments from April unless we find more work. I need to seek
overtime, my wife will have to work additional hours. We may have to deploy
family members to provide more childcare.
“We can’t
save, so have no resilience if anything significant goes wrong. If inflation
continues, we may have to take on a third job between us, or downsize to a
smaller property. In the worst-case scenario, we have to move in with parents –
unthinkable a couple of years ago, but now very much a consideration.”
Rebecca
Grundy, a mother of three and an administration assistant from Bolton, views
the latest interest rate rise from a different perspective.
“I’m a
prospective buyer, and ahead of today’s announcement, I’ve been thinking I’d
rather interest rates came up a bit,” she says. “We’ve been in rented
accommodation since we outgrew and sold our two-bed house in 2020. We were
outbid multiple times – prices just increased so quickly.
“Our
mortgage affordability has reduced 20%-30% over the past 12 months, and today’s
rate rise will definitely force us to lower our budget again. But I’d rather
have a higher interest rate of up to 5% and lower asking prices.
“We have a
very high buy-to-let-landlord population here in town, as low interest rates
drove demand for second homes and investment properties, pricing buyers on
local salaries out. There are various properties here that have sold and been
relisted in the past two, three years. Price histories show how overvalued they
are now – some have had little more than a lick of paint since the last sale,
but are almost 40% higher in price than two years ago. It’s just not
sustainable.
“Many
sellers are still currently expecting unrealistic prices that most normal
working families can’t afford – our household income is £40k. Will prices ever
come down to something normal again? Perhaps higher rates will help with that.”
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