With mortgage borrowers reeling from 14 consecutive Bank of England base rate rises, the number of households falling behind on payments is rising. Mortgage arrears jumped 13% in the second quarter of the year, and are likely to have increased since. Here, two homeowners and a buy-to-let borrower talk about the challenge of keeping up with the payments.
Stephen McKeown, 61, homeowner
McKeown bought his three-bedroom house in Swindon in 2018 for £253,000 on a five-year fixed mortgage deal at 2.69% interest, and was comfortably able to afford repayments.
He managed to build up equity of about £155,000 in his property, but when he lost his job in conservation education during the pandemic, he started using savings to afford mortgage payments of about £1,200 a month.
“I’ve been unemployed since August 2020. It’s hard to find a job at my age. I apply for jobs on an almost daily basis … My savings ran out in April this year.”
As McKeown’s mortgage is up for renewal in May 2024, and he would not qualify for a new mortgage with today’s significantly higher interest rates, he saw no other option but to put his house on the market.
“My lender was very helpful and agreed to six months of interest-only payments until I could sell my house, which means I’m currently only having to pay £260 a month.
“It’s been up for sale since May, but it’s a very difficult market. I dropped the asking price from offers over £325,000 to £300,000, and had an offer in July, but then the buyer pulled out, which left me adrift.
“Every night is sleepless for me, but I am somewhat glad I live alone because I’d hate to think how much worse it would be if I had a family to support. I try not to feel too sorry for myself – people are in worse situations than I am.”
McKeown believes he will have to dramatically lower the price of his house before the end of the year in order to avoid losing it, and fears he will not be able to secure affordable housing after the sale.
“We’re heading towards Christmas, and nobody is interested in buying at that time of year. God knows what I’ll do when I’ve sold the house, because I can’t buy another one. My current thought is to sell everything, put the remainder of my things into storage and then find a room in a shared house somewhere.
“Because I’ve worked abroad for a few years, I don’t think I qualify for the full state pension. I’m scared of ending up homeless when the money from the house sale runs out.”
Mark, 56, homeowner
One unexpected vet bill meant Mark, a network engineer from Derbyshire, had to miss January’s mortgage repayment.
“I had to pay £2,000 as my dog had glaucoma and lost both her eyes at Christmas, so I missed one repayment of £760,” said the 56-year-old, who declined to give his full name.
“I’ve had this mortgage for 14 years, but trying to get help from the lender was and remains very difficult. I have tried to arrange a repayment plan with them, but they wouldn’t put anything official in place as they said I would not be able to afford it.”
Mark was on a standard variable rate (SVR) mortgage when he fell into arrears, and tried moving to a fixed deal when the interest rates started going up but was declined.
“Before this mortgage crisis my monthly rate was £715, until October last year. Since the interest rates keep rising my monthly bill has risen to £880. I have been paying more than the monthly mortgage bill to bring the arrears down – last month I paid £900, but I can’t do that every month. Our mortgage is nearly half of my wages now, and I’m currently still about £450 in arrears.”
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Mark fears this will affect his credit score and his ability to remortgage in the future. “I’m making cuts and have to miss payments elsewhere to overpay my mortgage by £50 a month, but the lender is sending me letters to say I’m in arrears, then charges me £35 for the letter. It’s a catch-22.”
Sophie Siangolis, buy-to-let borrower
Siangolis, who owns 16 rental flats with her husband in her home town of Weston-super-Mare, Bristol and Highbridge in Somerset, says relentless interest rate increases this year will almost certainly force them to sell their properties.
View image in fullscreenSophie Siangolis says it’s no longer financially viable to be a landlord, and is hoping to ‘hand back’ her 16 rental properties soon. Photograph: Sophie Siangolis/Guardian Community
“The rents are no longer covering our mortgages; we’ve had a shortfall every month of between £2,500 and £3,500 for the past six months. We’re on SVR and the payments have doubled. I tried a couple of days ago to talk with some lenders about switching to a fixed rate, but they wanted to charge a fee of £3,000 for each property to go on a fixed deal, so it’s not worth it.
“We’re now in arrears of around £900 with service charges that we can’t pay. We’re panicking because we’ve got no money left, and can maximally carry on for another three months.”
Siangolis says the mortgage for one of her flats in Highbridge now costs £1,000 a month, plus £120 service charge. “But I only get £650 rent. We’ve put the rents up but they’ve got to be affordable for people. I can’t increase them further.
“We’ve had these properties for a long time, from between 2005 and 2007, but we’re having to sell them now, if we can.”
One of their properties, Siangolis says, is on the market, “a tiny two-bed flat in Bristol”, but the couple have only had one viewing and no offers. Some of their properties are in negative equity as they were bought in 2007, before the global financial crash.
“One sympathetic lender said to me: ‘A lot of people are in the same position as you.’ It frustrates me that the government can’t see the bigger picture. There’s a shortfall of rentals already,” Siangolis says.
“I feel sorry for some of my tenants who have rented from me for years, some are single mums and on benefits. Where are they gonna go? What happens to all the people renting from landlords like myself who are selling up now?”
