Homeowners impacted by the UK mortgage crisis express their outrage.
Fixed-rate or tracker mortgage borrowers face challenges, and some say they will have to sell their houses.
The remortgaging nightmare has just begun for Steven and his wife, a media expert from Guildford. People like me have trouble falling asleep at night; it’s terrible, he claims. “Our three-bedroom cottage’s mortgage is due for renewal in December. The low interest rates over the last 13 years have become the norm in our life. The family’s sole source of income is me. I’ll need to come up with an extra £1,480 a month if interest rates rise to 6%, which is more than double what we already pay. That is very terrible and catastrophic for our family.
The Bank of England increased rates by another 0.5 percentage points to 5% on Thursday, reaching a 15-year high, and the markets and homeowners are now having to adjust to the sharpest, fastest rise in interest rates since the 1980s.
The expectation on the financial markets is that the Bank of England will increase interest rates once more at its upcoming meeting in early August.
This has left many homeowners whose fixed arrangements are ending and those with tracker mortgages facing significant financial shocks after more than a decade of rates at 0.75% or below.
Young couples and families make up a substantial portion of the people who have contacted the Guardian; they are frequently more negatively impacted by interest rate increases than older homeowners because they have paid off smaller portions of their very sizable mortgages.
Steven, 52, and his wife have a mortgage that is interest-only. 20 years ago, they purchased their home with an initial interest rate of 4.8%.
However, Steven notes, “back then we had two paychecks and no kids, so we had to increase our mortgage throughout the years for home upgrades. “We still owe £480,000 on our mortgage, which means we’ll have to pay an additional £19,000 in interest every year. It’s destroying peoples’ lives.
Because of the popularity of fixed-rate mortgages, made during the ultra-low rates era, that have not yet expired, Steven believes the Bank’s decision to hike interest rates for the 13th consecutive time was a major mistake because millions of homeowners’ mortgages will not yet be impacted.
“It’s understandable why these increases aren’t affecting inflation right away. However, those who are affected are going through hell. Raising the base rate is an outmoded, crude solution that is completely inappropriate for addressing this complex, global issue.
“Rate increases are OK in theory, but the unprecedented pace at which they have been implemented has given consumers no time to prepare or plan. I had to obtain a new job to pay for this, and it’s only because of my somewhat higher salary that we might be able to avoid having to put the house up for sale. After many years of house ownership encouragement from various administrations, these rate increases itself are an inflationary measure that forces individuals to seek greater salaries.
In the hopes that interest rates would decline in the coming months, Kirsty, a marketing professional, and her husband, a self-employed electrician, both 42, from Epsom in Surrey, switched to a new tracker mortgage earlier this month at 0.34 percentage points above the base rate.
It was a gamble, admits Kirsty. “Because we have two young kids and must spend £2,300 per month in nursery fees, we took up an interest-only mortgage three years ago, which maintained our payments at £524 per month.
“Our new interest-only monthly mortgage payment is £1,600. Since we took it out, our rate has increased twice, and it will increase once more. We can change if things become worse, but for the time being we’ll hold out. When fixed deals are this poor, switching makes little sense.
The pair would have trouble making ends meet if their interest payments exceed £2,000 per month, according to Kirsty. “My husband and I both make good salaries, but our mortgage and childcare costs are crippling us.”
James, a 39-year-old insurance broker from north London, has also been taken off guard by quickly rising interest rates and has come to the conclusion that his wisest course of action is something he never saw himself doing a year ago.
“For the time being, we’re giving up property ownership totally. In September, the fixed-term loan we have for five years will expire. With these interest rates, our monthly repayments would increase from £3,700 to somewhere over £6,000, a hike of more than £2,000 per month. Despite the fact that my wife and I have substantial incomes, we are forced to sell our home and return to renting, he claims.
In a few weeks, the couple will list their home, which they have been remodelling for the last two years. It’s unfortunate. When we took for this mortgage, we put ourselves through a stress test up to an interest rate of roughly 4.5%, but an interest rate of 6% or higher on a £950,000 mortgage would be completely unaffordable. Although we anticipate spending £4,000 in rent each month for the next few years, this is still less expensive than getting a mortgage.
“We definitely still believe in home ownership,” he continued. “This is the sixth property I’ve purchased. But just now, things are simply too hectic. For the time being, we’d prefer to invest our money elsewhere than in real estate.
After the Liz Truss and Kwasi Kwarteng mini-budget in September of last year, Danny, a 49-year-old father of two from East Molesey in Surrey who works as an IT consultant, rushed to contact his mortgage broker six months before his arrangement was set to expire.
“We made payments totaling £2,300 a month. As interest rates began to rise, our broker was able to secure for us a five-year fixed term at a rate of 3.6%, which meant that we would ‘only’ be paying £1,500 more per month or £18,000 more annually. Prior to clicking “accept” and receiving the email confirming that the sale had been completed, I can remember my hand shaking and feeling queasy. Later on that day, this rate was discontinued, and prices continued to rise. Even though the mortgage now consumes 50% of our income, we are fortunate since at 4%, we would have had to sell.
After the mini-budget, according to Danny, his mortgage advisor made an effort to contact every one of his clients to warn them about an impending mortgage cost problem that would ruin the finances of millions of people.
He explained that people might be divided into three groups: those who ignored his calls and didn’t think they were significant, those who were too stunned or paralysed to respond, and the fortunate ones—those who picked up and took immediate action.
We are upset with the 70,000 Conservative party members who chose Liz Truss, individuals who don’t have mortgages and live in the home counties and who are oblivious to and incapable of understanding our suffering.