‘I’m really worried’: homeowners and would-be buyers on UK interest rates

Chris Felix-Hill, 47, and his wife, Adeline, from Steeple, Essex, are struggling to keep alive their dream of one day becoming homeowners, after “demoralising” house price rises during the pandemic and yet another interest rate rise from the Bank of England on Thursday, to 4%, a 14-year high.

“Today’s announcement just means more disappointment and frustration,” says Felix-Hill, who works in the adult education sector. “We’ve been saving for a few years and fortunately can live with my mum and her partner, which has allowed us to save up a £30k deposit.

“However, we couldn’t keep up with rising house prices last year. We found a property for £299,000, but because of higher rates and the cost of living, the amount we were allowed to borrow was slashed from over £300,000 to £262,000, so we couldn’t get it.”

Prices in the area have not come down much, he says. Instead, sellers unwilling to lower their prices have decided not to sell at the moment.

“There are a few properties within our price scope listed here, but I’ve looked at Halifax mortgage deals today, and with current interest rates of around 5.2%, repayments for a £300k two-bed would be around £1,600 a month, and rates could go up further.

“I’m nearly 50; in a few years’ time, I won’t be able to get a mortgage. I have a good degree and we earn just under £30,000 each; you’d think this would be enough to get a two-bed cottage of your own. It’s just depressing. I’m really worried I will have nothing in the future.”

Stephen, an IT professional in his late 30s from Hampshire, said the latest interest rate rise had cemented his and his wife’s fears that the mortgage repayments for their two-bedroom property would rise dramatically this spring.

“Our two-year fixed rate of 1.4% expires on 24 March. With the Bank of England having raised its rates to 4%, we’re looking at an increase to about 4.28% on a two-year variable rate, raising our monthly payments to around £1,500, from currently £880,” he says.

“We have a household income of around £80k, but we’ve stopped saving and will have to effectively put our lives on hold to get through this. We were hoping to do our honeymoon this year, which is now unlikely, and these extra costs mean it’s also becoming less likely we’ll have children. If rates don’t come down, we may have to move to a cheaper part of the country.”

For Philip, 42, a police officer from Horsham, West Sussex, the Bank’s announcement means his family’s mortgage repayments will rise by 50% soon – and become unaffordable unless he and his wife generate higher earnings.

He has to refix his £260,000 mortgage by the end of March, and is looking at a provisional rate of 4.9%, which would add £500 to his current payments of £1,050 a month.

“The increase from our current 1.5% is eye-watering, and adds to our overall sense of financial insecurity, especially with bills rising also. Our household income of £85k is not enough to keep paying our mortgage. We’ve got two young children, childcare costs and no financial wriggle room,” he says.

“We’re unlikely to meet payments from April unless we find more work. I need to seek overtime, my wife will have to work additional hours. We may have to deploy family members to provide more childcare.

“We can’t save, so have no resilience if anything significant goes wrong. If inflation continues, we may have to take on a third job between us, or downsize to a smaller property. In the worst-case scenario, we have to move in with parents – unthinkable a couple of years ago, but now very much a consideration.”

Rebecca Grundy, a mother of three and an administration assistant from Bolton, views the latest interest rate rise from a different perspective.

“I’m a prospective buyer, and ahead of today’s announcement, I’ve been thinking I’d rather interest rates came up a bit,” she says. “We’ve been in rented accommodation since we outgrew and sold our two-bed house in 2020. We were outbid multiple times – prices just increased so quickly.

“Our mortgage affordability has reduced 20%-30% over the past 12 months, and today’s rate rise will definitely force us to lower our budget again. But I’d rather have a higher interest rate of up to 5% and lower asking prices.

“We have a very high buy-to-let-landlord population here in town, as low interest rates drove demand for second homes and investment properties, pricing buyers on local salaries out. There are various properties here that have sold and been relisted in the past two, three years. Price histories show how overvalued they are now – some have had little more than a lick of paint since the last sale, but are almost 40% higher in price than two years ago. It’s just not sustainable.

“Many sellers are still currently expecting unrealistic prices that most normal working families can’t afford – our household income is £40k. Will prices ever come down to something normal again? Perhaps higher rates will help with that.”