‘Our mortgage is rising by £300 to £1,700 a month – we’ll have to cut back’

Homeowners nearing the end of their fixed-rate or trapped on high interest variable loans fear they will continue to face huge mortgage costs despite promising economic news.

The Bank of England held interest rates at 5.25 per cent for a sixth consecutive meeting on Thursday, with economists expecting that will be cut this year.

And on Friday, GDP figures from the Office of National Statistics showed the economy grew by 0.6 per cent between January and March, officially taking the UK out of a recession.

But the good news is not likely to filter down to homeowners for some months, experts have warned.

Economists told i this week that interest rates would still remain above 4 cent until 2025, with industry experts now warning that new mortgage offers will also stay above 4 per cent for most homeowners for the rest of the year.

Those with high equity or high deposits were able to find themselves a deal below 4 per cent in January, but these deals have largely disappeared since then, as expectations for when the first interest rate cut would come were pushed back. In recent weeks there have been increases to mortgage rates.

‘My mortgage will rise by £300 a month’

Francesca De Franco says she will have to cut back on eating out and school trips (Photo: Francesca De Franco)

Francesca De Franco is facing her mortgage going up by £300 over the summer.

The PR consultant and husband Matthew Collom, who works in financial publishing, will see their five-year fixed rate of 1.84 per cent end in July.

A mortgage broker advised them that their current mortgage provider – Nationwide – currently offers the best deal for them of 4.99 per cent. It means their monthly payment will jump from around £1,400 to £1,700.

With the offer expiring in a few weeks, Ms De Franco, 45, was hoping interest rates would go down, bringing mortgage rates down with them. But with experts predicting that a rate cut won’t be happening any time soon, she will now have to accept the hike.

“This was only meant to be a backup as I was fully expecting to get a new and better quote,” said the founder of The Parent Social.

“However, last week Nationwide announced that it increase rates on new fixed-term products. I now feel pressurised into accepting the offer.”

Nationwide and Santander also declared that they will push up the cost of new deals as uncertainty remains over lending costs.

The mother-of-three, from Banstead in Surrey, said the rise would impact her family. “We won’t need to be eating beans on toast. I know there’s people worse off. But we will have to cut back on extras like eating out and school trips.”

‘I’m trapped in an unsellable home with a high-interest mortgage’

Caption: Paul Afshar?s mortgage and rent from his shared ownership property costs have risen by 30 per cent since 2021 (Photo: Paul Afshar)

Paul Afshar, 39, moved into his one-bedroom shared ownership flat in Tower Hamlets, east London, 16 years ago. He is unable to sell due to building safety issues and is stuck with a standard variable rate (SVR) mortgage, generally the most expensive mortgage that a lender offers.

Those that don’t remortgage to a new deal before a two or five-year fixed rate ends will revert to their lenders’ SVR.

While SVRs have always been more expensive than fixes, they have risen significantly over the past two years as mortgage rates have risen in line with the Bank of England’s base rate. The average SVR currently sits at 8.65 per cent.

Since the Bank started raising its base rate, in late 2021, Mr Afshar’s mortgage has increased by 30 per cent, while his rent and service charges have also increased. In total, he now pays £1,270 a month.

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He is considered to be a “mortgage prisoner” as a result of cladding being found on his building, which has affected the value of his home and means lenders won’t allow him to remortgage from his high-interest variable rate mortgage to a cheaper fixed-rate.

The cladding crisis has left thousands of new-build flats across the country unsellable because of the discovery of building safety defects in the wake of the Grenfell Tower fire.

“I applied for a new mortgage six weeks ago and was rejected,” the 40-year-old from Hackney, east London, said. “Until the cladding is sorted or lenders change their rules, I’m trapped.”

Six major lenders have relaxed their rules recently, following new guidance published by the Royal Institution of Chartered Surveyors (RICS) regarding valuations. However, the measures only cover properties in buildings of 11 meters and over and so not every flat owner affected will benefit.

Mr Afshar said the situation had caused him a lot of anxiety. “It’s a huge stress and it keeps me awake at night. It’s money going down the drain.

“I’ve had to cut back my outgoings. I’ve changed supermarket and we’re not having a summer holiday this year. It’s worrying how much further it’s going to go up.”

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