The homeowners hit hardest by the interest rate rise
Millions of homeowners throughout the UK will be hardest hit by the decision to raise the Bank of England base rate to 4.5 per cent.
It marked the 12th consecutive time the Bank has raised its base rate since December 2021 – taking it to its highest level in nearly 15 years as it battles against inflation.
It is particularly bad news for homeowners and first-time buyers as it impacts the amount of interest banks charge mortgage holders. Interest rates on mortgages have increased dramatically since 2021, with homeowners now paying hundreds of pounds more per month.
Here i speaks to some of those hit hardest by the rise in interest rates.
Single mother Timea, 40, lives in a flat in Woolwich, southeast London, that she purchased using the Government’s shared ownership scheme.
She owns 30 per cent of the property – with the help of a mortgage – and pays rent to a housing association, which owns the remaining 70 per cent.
Timea’s rent increased by 7 per cent in April from £743.62 to £795.67. On top of that, she pays a service charge of £465.78 per month, which she expects will increase later this year due to inflation.
She also pays £330 per month on her mortgage, which is part of a two-year fixed rate deal due to come to an end early next year.
Timea told i she is “absolutely dreading” her fixed rate coming to an end, as she expects she will have to pay at least £100 more per month when it does.
“I had to put all the money I had into this property when I was buying. Every single penny I had. I was left with no savings, but I needed somewhere to live. I wanted to secure a home for my son and me,” she said.
Timea cannot move from her home as it is embroiled in the post-Grenfell building safety scandal, which has left thousands of flats unsellable until safety defects are fixed.
Before selling she also must pay £15,000 to extend the property’s lease, something she says she was not warned about before purchasing the property.
Timea would like housing associations to agree to purchase homes like hers that are trapped in the cladding scandal and use them to house people on social housing waiting lists.
“There are many people like me who need to move on,” she said. “We are effectively prisoners in our own homes.
“I’m in shared ownership, because I have a limited income … I’m in a very precarious position and they could help solve it.”
‘A home to raise our boy in feels out of reach’
First-time buyers Laura Potter, 27, and her husband Craig, 29, have been left feeling “deflated” by the interest rate increase as affordable housing seems inaccessible to them.
“We both feel like the home we want to raise our little boy in is out of reach for us,” she told i.
“We are just at the beginning of our journey,” she said, explaining that they have been going “back and forth” with financial advisors, only to discover that adverse credit from the past has had a significant impact on their ability to borrow.
Ms Potter said: “We had no idea that things from up to seven years ago would still have an impact.”
The couple, who live near Glasgow, has been attempting to improve their credit score and adding to their deposit savings, but they feel there is limited information available on how to improve their chances of getting onto the housing ladder.
Christopher Walkey, 48, currently pays £1,120 per month on his mortgage for his home that he owns with his wife in north Essex.
His five-year fixed-rate deal is about to come to an end and as things stand, he looks likely to be paying roughly £350 extra per month.
“You have to be a bit more careful. You have to work a bit harder on your own business to make up the costs,” said Mr Walkey, who works in PR and runs a property news website.
“We had a desire to pay off the mortgage quickly by overpaying but this kind of cuts that out.”
Mr Walkey said he is concerned that mortgage interest rates will “keep going up and up and up” due to “the unpredictable Government that we’ve got in and all of the global issues occurring”.
He added: “The working-class people will be generally affected more by this whole affair we have at present with inflation from food to mortgage rates.”
‘I’m thinking twice about having kids’
Sean Harris, 33, said rising interest rates have made him “think twice about kids” due to the additional financial burden of starting a family.
His four-year fixed-term mortgage is coming to an end in late May meaning he will have to pay double on a new deal for his two-bed terraced house in Liverpool.
He said today’s interest rate increase made him feel “gloomy resignation” about the future as he is “sceptical” about economists’ predictions that interest rates will fall later this year with inflation.
Mr Harris, a software consultant, described himself as “risk-averse”, due to graduating when the 2008 financial crisis hit. He has decided to lock in a more expensive fixed-term mortgage for the next four years rather than risk waiting until interest rates come back down.
“The best rate I can find, regardless of fixed length, is about double what my current rate is so that’s a sting,” he said, explaining that the monthly cost will go up from around £200 per month to upwards of £400.
“I would rather have the certainty be able to plan ahead than wait on what might happen,” he added.
This is feasible as Mr Harris has been “double paying” for the past four years as a financial security measure.
He said he will be able to afford the bumped-up payments but only because he has been “fortunate” in life, meaning he can cut back on trips abroad or put less money into savings.
But the interest rates have made him reconsider plans to move house as he would rather stay “anti-fragile”. “I just want to stay as cheap as I can afford,” he said.
Jinesh Vohra, chief executive of money management company Sprive, said today’s interest rate hike will have a “significant impact on homeowners across the board” as owning a home and paying off a mortgage gets less and less affordable.
Madeleine McIlwain, 26, said she has “never been more stessed” than over the past few months as she has been trying to buy a house.
