Mortgage hell hits: meet the Londoners forced to face up to the rate rises

Charlotte Dale worries she and her family will be stuck in renting  (Adrian Lourie)
Charlotte Dale worries she and her family will be stuck in renting (Adrian Lourie)

Steven Brewis has already put his wedding off three times and thanks to rising interest rates, he’s now considering it once more.

“We’ve postponed our wedding because of Covid and we’re thinking about doing it again because it’s hard to justify paying out for it if the mortgage is going up so much.”

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

Despite Chancellor Kwasi Kwarteng’s U-turn on abolishing the 45p rate of tax, mortgage rates are not forecast to fall.

As with many people set to come off a low, fixed-rate mortgage, Steven, 49, has found his repayments are skyrocketing.

“Even on my decent wage, 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 their two children.

He has a £400,000 mortgage, for which he currently pays £780 a month, and he’s worked out that this will shoot up to £1,980 a month if the rate goes up to six per cent as predicted.

Steven grew up in the East End in the Eighties and Nineties and remembers his parents struggling with their payments when the rates were 15.5 per cent. “We nearly lost our home,” he said. “I used to hear my mum crying about how she couldn’t afford the mortgage, and it resonates now.”

Steven Brewis with his fiancée Rosanna (Steven Brewis)
Steven Brewis with his fiancée Rosanna (Steven Brewis)

That he’s having to consider moving his wedding is upsetting and Steven is looking at all the options; however, the sharp rise in the cost of living is limiting these severely.

He could fix earlier on a lower rate, before the end of his deal, but his early repayment charge works out at £15,000. Pretty steep by any standards. Instead, he’s trying to overpay but he’s thwarted there as well because of the rise in energy, water and food bills.

“I feel squeezed more and more. Two years ago, I could have paid £1,000 a month off, now it’s £250 because the household bills have gone up too,” he says. “We had disposable income but now everything is out the window.”

London’s housing stock is estimated to be worth £2.4 trillion and the house-price-to-earnings ratio, which compares the median house price to the 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, which leaves Londoners particularly at risk during these difficult times.

‘I’m constantly thinking about money’

More than a third of homeowners with a mortgage is couples with children. Liane, 33, and James Howard, 32, a personal assistant and mechanical engineer, live with their newborn daughter in a two-bed terrace house in Croydon.

They’re terrified about what will happen when their fixed-rate mortgage ends in July 2023, as they’re going to have to find money for nursery fees too.

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

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

The house-price-to-earnings ratio is London is above 11 (Matt Writtle)
The house-price-to-earnings ratio is London is above 11 (Matt Writtle)

She had planned to return to work four days a week but is now looking at doing five days in four as they can’t afford the drop in salary. This means she’ll have less time with her first baby.

“Everything has come at the same time; we were married last year, had a baby and now there’s the mortgage,” she says. “You get the slightest pay rise at work, but it’s quickly wiped out by everything that’s happening.”

“We can’t plan now,” adds James. “With nursery fees and the increased mortgage fees, it feels very uncertain at the moment.”

‘If this rate runs out we can’t afford it’

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

Liam, a police officer, and Emma, a nurse, have had an offer accepted on a house in Medway, Kent. The entire process has been particularly difficult for them as they live with their respective parents, miles apart, and their jobs involve shifts, meaning they weren’t always around on Saturdays for viewings.

It’s their dream to move into their own home together but, if this house purchase falls through, that dream will be snatched away. “It’s changing day by day. If our mortgage offer [of 3.9 per cent] doesn’t work, the house just isn’t affordable for us,” says Liam.

The couple know that they have their rate, but they’re anxious about how the interest rises will affect people further up the chain.

“The people we are buying from need to sort out a mortgage in the 5.1 per cent bracket,” added Liam. “They could drop out. There are no promises… I’d love to try and keep looking for something but the reality is if this rate runs out, we can’t afford it. It takes the possibility out of our reach.”

‘If prices go down that’s all our savings gone’

Alex Lawson (Adrian Lourie)
Alex Lawson (Adrian Lourie)

Alex Lawson, 27, an engineer in the renewables industry, is another who fears the worst. She sold her home in Scotland in July and she and her partner have had an offer of £660,000 accepted on a two-bed Victorian terrace house in Hither Green, south-east London.

Alex’s budget was originally £700,000 but, with successive interest rate rises, this shrunk by £40,000 as the payments were becoming too high.

She secured their current mortgage offer of 3.71 per cent four weeks ago. “I looked at what a new application would be now and it’s 4.2/4.4 per cent which we can’t afford.” However, the worry for her now is a house price crash — she has a 15 per cent deposit and is vulnerable to being in negative equity.

“I’m worried that if prices go down by the 15 per cent that’s being predicted, that’s all our savings gone.”

‘We feel stuck’

Charlotte Dale (Adrian Lourie)
Charlotte Dale (Adrian Lourie)

Right across the market, shockwaves are being felt. Londoners trying to buy their forever family home are finding that possibility looking further out of reach.

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

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

London rents increased by 20 per cent in the first quarter of this year and paying out for rent increasingly risks eating into Charlotte’s capital for her dream home.

They backed out of a house sale in June because the vendors asked for £10,000 extra. “Interest rates weren’t even in my mind at that point,” she said.

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

Over the coming months, more and more London homeowners will find themselves affected as they come off their fixed low rates or decide to move house.

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