Some of those whose lower fixed deals will end tell of
their fears at having to find hundreds of pounds extra each month
Homeowners face £19bn rise in mortgage costs as
fixed-rate deals expire
Jedidajah
Otte
Thu 4 Jan
2024 16.46 GMT
https://www.theguardian.com/money/2024/jan/04/uk-homeowners-fear-impact-2024-mortgage-timebomb
Jodi, 42, a
teacher from Kent, is among millions of homeowners who are yet to be affected
by the higher cost of borrowing, as their fixed deals at much lower interest
rates are set to expire this year.
“Our
mortgage payments will go from £1,400 per month to £2,100,” Jodi said. “Our
wages are stagnant and the cost of living is ever increasing. We are both
public sector workers – my husband is a police officer – so have had real-term
pay cuts for years. How are we supposed to find an extra £700 per month?
“It’s just
sleepless nights and blind despair.”
Jodi and
her husband are among scores of people who shared with the Guardian how they
will be affected by substantially higher mortgage costs after their old deals
expire, and what they are trying to do to prepare. Most were from the south of
England, particularly London, where many younger householders and families have
vast outstanding mortgage loans as house prices are high.
The arrival
of cheaper fixed-rate deals from various big UK lenders this week will
alleviate the anxiety of some homeowners, in particular those with substantial
levels of equity in their properties as deals for such mortgages are dipping
below 4% interest.
However,
for many householders the new lower rates will bring limited relief. Nina, 53,
a freelance advertising producer, bought a two-bed flat in Hackney Central with
her husband in October 2019 with the government’s help to buy programme.
“What we
probably should have done was pay off more [while interest rates were low], do
some overpayments, but we just never did. We were riding on the low interest
wave, like so many other people,” Nina said.
About 55%
of UK mortgages have been moved on to a higher interest rate since borrowing
costs started to rise in December 2021, and another 5m mortgages are expected
to be repriced by 2026.
Having
“staircased” – gradually buying additional shares of their property – the
couple have two separate mortgages on their home. “Unfortunately, we’ve had to
renew the larger part of our mortgage back in November, and refixed at 5.59%
until January 2026, up from 1.25%,” Nina said.
“The
smaller mortgage is at 1.45% until 31 January, so we’re hoping for something
like 4.59% on this when we renew, so that’s fab news for us.
“Every bit
will help, but we worry that we won’t have enough money to cover the mortgage.
We’re expecting our new monthly mortgage to be in the region of around £3,000
up from £2,000. I have savings, but am spending them on living, as I’ve been
looking for work since August.
“It’s
stressful. My husband has two kids he needs to support as well. If I’m not in
work by May, we’ll be in dire straits.”
The couple
decided to rent out their spare room on Airbnb and have been cutting back
wherever they can.
“I’ve been
applying for jobs I’m overqualified for,” Nina said, “and took on cat-sitting
jobs over Christmas, paying around £500. But it’s all quite scary when you’re
already feeling like you’re at your limit.”
For Amy, a
30-year-old finance professional from London, the era of higher interest rates
means the future she and her partner had mapped out is no longer affordable,
and all they can do to prepare for higher borrowing costs is to abandon their
plans.
In January,
the couple’s three-year fixed rate of 1.76% will be replaced by a new rate of
5.95%, fixed for two years at the end of last year.
“Our
mortgage repayments will rise from £1,500 a month to £2,500. This is our first
property, a new-build two-bed flat, bought for £480k and with a 5% deposit.
This isn’t a property that will increase in value, I think we’ll sell at a
loss,” Amy said.
“Because of
these interest rates, we’ll repay £60k over the next two years, but only about
£8k of these repayments will be equity building [the rest is on interest], and
future big life decisions will be impacted.
“My mental
health has been significantly affected. Our quality of life will decrease, but
most importantly our ability to save for our next house has been severely
curtailed. This leaves us in serious doubt whether we can afford to have a
child, as we can’t save for things such as taking maternity leave and putting a
child in a £2,000-a-month nursery, which is the standard cost here now.”
Amy’s
concerns about interest rates making raising a family in the capital
unaffordable is a concern for higher-income families too, including 43-year-old
Matthew, a lawyer from London, who is in the top 1% of earners and hesitant to
go for a new fixed deal while interest rates are still this high.
“We were
lucky enough to have been able to borrow £1.2m to buy a normal family home on a
normal street in north London,” he said.
“Our
monthly repayments are currently £4.9k but are due to go up to £8.8k on the
standard variable rate when our five-year fix ends in May. At that stage our
lives will become unaffordable.
“We’ll have
no choice but to stop paying into pensions, and plunder what little savings we
have to cover the increased repayments until interest rates drop low enough to
go through a fixed deal again. I feel shafted by the housing market, it’s
absolutely ridiculous that effectively all of my income will go on housing
costs. This is no way to live; it’s unsustainable.”
Some people
decided they could not wait to see whether mortgage rates would drop. Jonathan
Taylor, 61, a cybersecurity specialist from Odiham, Hampshire, said re-fixing
his mortgage at the end of 2023 would have been unaffordable.
Having
taken out a two-year fix at 1.08% at the end of 2021 on his outstanding
mortgage of £236,500, his plan had been to pay it off by taking his tax-free
pension lump sum at age 67.
“The
interest element of my mortgage payments was set to increase from £236 a month
to £1,905 from 1 January,” he said. “I just couldn’t afford this, so I decided
to bring forward my pension drawdown in order to pay off most of my mortgage
now, and took a lump sum of £200k last week. This will reduce the monthly
interest payments to £460.
“However,
drawing my pension six years sooner than planned will significantly reduce my
overall pension, as the money can no longer accumulate as it did inside my
previous employer’s defined benefits pension scheme.”
Taylor says
he was projected to have an annual pension of £45,000 from age 67, but now, due
to a combination of cashing his pension early and turmoil on the bond markets
in the aftermath of Liz Truss’s government, it is looking to be £31,000 in
today’s money, not accounting for inflation – “quite substantially less”.
“I wrote to
my MP, [Conservative] Ranil Jayawardena, to warn that more people would be
forced to take early retirement to access their lump sums to pay off mortgages.
No reply.”
.jpeg)
Sem comentários:
Enviar um comentário