Mortgage rate pain

The mortgage charter seems to have allayed any fears of repossession which, amongst other reasons, has contributed to reduced activity in the housing market.

Unless people are directly impacted by births, deaths and marriages the status quo now appears to be stay put and hope for the best.

Not yet, is how I would respond to being asked "Are you starting to see people selling their houses because their fixed rate deals are expiring/have expired and they know they can't afford the repayments?". Currently, I am having lots of conversations with clients around their affordability, but these are focused on what can be done to keep them in their homes; extending the mortgage term, looking at their outgoings (do they really need Apple Music, Amazon Music AND Spotify?), more extreme cost-cutting looks at things like selling cars to repay the finance. But these are all measures to stay in their home. If the cost of living continues to rise then I think some people will have run out of options and selling is going to become their only way forward, but it's an absolute last resort in most people's minds unless they were toying with the idea anyway and the current situation has just crystalized that thinking into action.

Remortgage borrowers who are choosing to switch all or part of their mortgage to Interest Only are increasingly aware this may mean selling what they previously saw as their 'Forever Home'. This might mean they're able to stay in their home and maintain their lifestyle over the next few years while their children are still young and living at home, after which they can sell and downsize with less impact on their family than if they were to take drastic action now.

At the moment, we've not seen much evidence of clients choosing to sell up and downsize, or rent. Most borrowers who are in a tough spot have seen it coming down the pipe and slashed their discretionary spending, hoping to muddle through. The acid test will be if unemployment starts increasing significantly, which seems the logical conclusion of a massive reduction in consumer spending.

The newly introduced mortgage charter has given homeowners some much-needed breathing space to avoid the immediate necessity of selling their homes. The flexibility to switch the mortgage to interest only or extend the term in order to reduce the payments has provided a short-term lifeline for borrowers. In the long term, however, if rates remain high, undoubtedly many will need to think more seriously about selling up and downsizing, or moving into cheaper rental properties to ensure they can survive financially month by month. What we are seeing right now however is a much larger number of our buy-to-let landlords now selling their rental properties once their fixed rate deals end, as the rental income now often doesn't even cover the much higher mortgage payments. This, combined with the tax they pay on the rental income being in line with their personal income tax too, now makes being a private landlord far less appealing, and as a result, many landlords are starting to sell up.

Although we haven't seen people looking to sell their houses, we have noticed that some are more cautious as they are concerned about overspending. A number of those that are looking to move are proceeding but on a slightly lower purchase price due to the higher mortgage costs.

People are adapting to the rapidly changing environment in their own way. So, we’ve had some older borrowers with around £100k mortgages decide to pay them off by other means rather than remortgaging on to higher rates. As well as that, we’ve had some clients postpone moves due to forecasted higher payments. For everyone it seems, there's a doubling down as people practice really focused strategic thinking. As we support our customers, we know that the choices they make are even more keenly as a result of past experience, future planning, and risk management.