‘I’m retired and spiralling mortgage costs mean we’ve had to drain our savings to pay £400 more a month’
Jill and Ian Carman Stewart thought they had their retirement planned out before their interest only mortgage payments rose from £600 to £1,000 a month amid soaring interest rates.
While Ian, 69, continues to work as a financial consultant, Jill, 72, is retired and is drawing a state pension.
Having already cut back on travel and food shopping, the pensioners felt there was not much else they could do to reduce their spending.
So instead they’ve had to raid their savings intended for retirement to pay off the remainder of their £120,000 mortgage in full.
While they know they’re in a fortunate position compared to some, Jill worries that if anything goes wrong – such as their income dropping or either of them needing care – they will have less of a cushion.
“It’s security that the mortgage will be paid off,” she told i. “But with me just living on a state pension, I worry in case the money from Ian’s consulting stops.”
Prime Minister Rishi Sunak has ruled out assistance for homeowners after the average two-year fixed rate mortgage rate climbed to 6 per cent on Monday for the first time this year.
It’s estimated that 1.4 million people in the UK are set to remortgage in 2023 alone, according to ONS, meaning they could be faced with significant increases to their monthly bills by hundreds of pounds.
Mortgage lenders have been hiking rates and pulling deals at a rapid pace in recent weeks, driving up costs for homeowners looking for new deals.
The Bank of England is set to increase interest rates for the 13th time in a row after inflation remained stuck at 8.7 per cent.
Research by fintech firm Moneyhub earlier this week found 26 per cent of homeowners said they wouldn’t be able to afford their mortgage if rates go up again. A further third said they were concerned their mortgage would be unaffordable when they next re-mortgage.
‘We can’t cut back anymore’
Ian and Jill, a former nanny from Essex, visit Spain frequently but have had to stop going abroad at peak season.
“We like to go away as often as possible. But everything’s gone up, and we now avoid going during school holidays because airfares have risen,” she said. “We used to shop at M&S and we now shop at Aldi and Lidl.
“We do eat out once a week. We can’t cut back anymore without really changing our standard of living. We’ve worked hard and want to enjoy our retirement.”
The average UK household is paying over £1,000 a year more for food than in 2020/21, new analysis by Labour has found.
A typical household spent £69.20 a week on food and non-alcoholic drinks in the year to March 2021, based on figures from the Office for National Statistics (ONS). Adjusted for inflation, UK households spent £89.29 a week between March 2021 and May 2023. However, food inflation has fallen for the second consecutive month.
Meanwhile, house prices across the UK increased 3.5 per cent in the year to April 2023, down from just over 4 per cent in March 2023. The UK annual private rental price growth rose to 5.0 per cent in the 12 months to May 2023.
Government should ‘fulfil duty of care’
Paula Higgins, chief executive of The HomeOwners Alliance said the Government had a duty to support people who are struggling with mortgage rises – especially because it encouraged people to buy homes when rates were lower.
“During the post-lockdown property boom of 2021, the Government encouraged people to get a mortgage and buy homes with incentives like the stamp duty holiday,” he said.
“But as homeowners emerge from deals secured at that time – including a two-year fixed rate at 0.79 per cent – they’re in for a very real shock as average mortgage rates have now hit six per cent for a two-year fixed rate.
“Government should work closely with lenders to ensure they are fulfilling their duty of care by proactively helping their customers who may be struggling to meet payments. There are creative ways to do this, for example by offering a longer mortgage term or interest-only payments, but not at the detriment of a poor credit rating that will affect them for years later.”
Advice for homeowners
Those coming to the end of their mortgage deal should make sure they shop around for the best rate.
Paula Higgins, chief executive of The HomeOwners Alliance, said: “While rates look horribly high, and they are, they still aren’t as bad as your lender’s Standard Variable Rate – which could be as high as 8 per cent. This is the rate you default to if you don’t switch in time.
“So if your deal ends later this year, don’t ‘wait and see’. You can lock in a mortgage rate now and keep it under review. Check what your current lender has to offer and use a fee-free broker to search the market for you to find the best deal. Keep on top of the best mortgage rates on offer. “
Ms Huggins urged those struggling to meet their mortgage payments to speak to their lender.
“Despite the overwhelming feeling of being in financial free-fall at this time, homeowners need to take control,” she said. “Just one missed mortgage payment could affect your ability to borrow money from any lenders in future. So if you’re worried, speak to your lender.”
Your lender may be able to:
- Extend your mortgage term, for example from 20 to 25 years, so you can pay less each month (although you’ll pay more interest overall).
- Reduce your monthly payments for a set period of time, while you sort out your finances.
- Offer a mortgage holiday: This is when you take a break from repaying your mortgage, although interest continues to accrue during this time.
- Switch to interest-only repayments: This means only paying off the monthly interest owed on your debt and not any of the capital; it would cut your monthly mortgage payments but you’ll need to have a plan for how you will eventually repay the capital.
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