The true cost of the mortgage crisis


Steven Brewis has already postponed his wedding three times and, thanks to rising interest rates, is now considering it once again.

“We have postponed our wedding due to Covid and are thinking of doing it again because it is hard to justify paying if the mortgage is going up that much.”

He is just one of thousands of Londoners now facing housing risk with life plans in tatters after lenders’ mortgage rates soared following the Government’s mini-budget.

Despite Foreign Minister Kwasi Kwarteng’s U-turn on abolishing the 45p tax rate, mortgage rates are not expected to decline.

Like many people willing to get out of a low fixed-rate mortgage, Steven, 49, found his payments skyrocketing.

“Even with my decent salary, it’s going to cripple us,” he admits. He works in data science and digital health, and lives in a four-bedroom house in Chipping Ongar, Essex, with his fiancée Rosanna and her two children.

He has a £400,000 mortgage, for which he is currently paying £780 a month, and has calculated that it will skyrocket to £1,980 a month if the rate rises to six per cent as predicted.

Growing up in the East End in the 1980s and 1990s, Steven remembers his parents struggling with their payments when rates were 15.5 percent. “We almost lost our house,” he said. “I used to hear my mom cry because she couldn’t pay the mortgage, and now she resonates.”

Steven Brewis with his fiancee Rosanna

/ steven brewis

That she has to consider changing her wedding is upsetting and Steven is considering all the options; however, the sharp increase in the cost of living is severely limiting them.

You could lock in a lower rate earlier, before the end of your deal, but your early repayment charge is £15,000. Pretty steep by any standards. Instead, you’re trying to overpay, but you’re also frustrated by rising energy, water, and food bills.

“I feel tighter and tighter. Two years ago I might have paid £1,000 a month, now it’s £250 because the household bills have gone up too,” she says. “We had disposable income, but now it’s all out the window.”

London’s housing stock is estimated to be worth £2.4 trillion and the house price-to-income ratio, which compares median house price to median gross annual income, is above 11 .

This means that the average property price in London is 11 times the average salary, well above the rest of the UK, leaving Londoners particularly at risk during these difficult times.

“I constantly think about money”

More than a third of mortgaged homeowners are couples with children. Liane, 33, and James Howard, 32, a personal assistant and mechanical engineer, live with their newborn daughter in a two-bedroom terraced house in Croydon.

They’re terrified of what will happen when their fixed-rate mortgage expires in July 2023, as they’ll also have to find money for childcare fees.

They currently pay £1,300 a month, but if rates were increased to six per cent, their monthly payments would be £2,035.

“I constantly think about money and how to cut back,” says Liane, who is on maternity leave.

House price to earnings ratio in London is above 11

/ matt writtle

She had planned to go back to work four days a week, but is now considering doing five days in four as they cannot afford the drop in wages. This means that she will have less time with her first baby.

“Everything has come at the same time; we got married last year, had a baby, and now there’s the mortgage,” she says. “You get the slightest raise at work, but everything that’s going on wipes it out quickly.”

“We can’t plan right now,” adds James. “With childcare fees and mortgage rates going up, it feels very uncertain right now.”

‘If this rate runs out, we can’t pay it’

First-time buyers Liam O’Neill, 26, and Emma Page, 25, are also struggling. They are racing against time before the home they long to live in together is taken from them.

Liam, a police officer, and Emma, ​​a nurse, have accepted an offer for a house in Medway, Kent. The whole process has been particularly difficult for them, since they live with their respective parents, miles away, and their jobs involve shifts, which means that they were not always present on Saturdays for performances.

Their dream is to move into their own house together, but if the purchase of this house fails, that dream will be taken from them. “It is changing day by day. If our mortgage offer [of 3.9 per cent] it doesn’t work, the house just isn’t affordable for us,” says Liam.

The couple knows they have their rate, but they are anxious about how the increased interest will affect people further up the chain.

“The people we’re buying from need to work out a mortgage in the 5.1 percent bracket,” Liam added. “They could drop out. No promises… I’d love to try to keep looking for something, but the reality is that if this fee runs out, we can’t afford it. It takes the possibility out of our reach.”

‘If prices go down, all our savings will be gone’

Alex Leyson

/ Adrian Lourie

Alex Lawson, 27, an engineer in the renewable energy industry, is another who fears the worst. He sold her house in Scotland in July and she and her partner accepted a £660,000 offer on a two-bedroom Victorian house in Hither Green, southeast London.

Alex’s budget was originally £700,000 but, with successive interest rate increases, it was reduced by £40,000 as payments were becoming too high.

She locked in her current mortgage offer of 3.71 percent four weeks ago. “I looked at what would be a new app now and it’s 4.2/4.4 percent that we can’t afford.” The concern for her now, though, is a falling home price: She has a 15 percent deposit and is vulnerable to negative equity.

“I am concerned that if prices drop by the 15 percent that is forecast, all of our savings will be gone.”

‘We feel trapped’

charlotte valley

/ Adrian Lourie

Across the market, the shock waves are being felt. Londoners trying to buy their family home forever are finding that possibility seems further out of reach.

Charlotte Dale is PR for real estate agent Allan Fuller and started renting with her husband in their favorite area, but says, “Now we feel stuck.”

They sold their property in south-east London last year and live in Richmond, where they want to buy, with their two young children.

Rents in London rose 20 per cent in the first quarter of this year and paying rent is increasingly at risk of consuming the capital of Charlotte for the home of your dreams.

They pulled out of a June house sale because the sellers asked for an extra £10,000. “Interest rates weren’t even on my mind at the time,” she said.

They found another apartment last week and accepted an offer, but Charlotte is anxious because they left it too late and now they won’t meet the lenders’ criteria for affordability. “I am worried that it was high [in June] and the new monthly payments will be even higher.”

In the coming months, more and more London homeowners will be affected as they drop their low fixed rates or decide to move house.

Only time will tell, but if some forecasters are right, this mortgage crisis could soon be on par with the cost of living crisis.

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