Story for The Times: How clients are handling those higher mortgage rates

Although we have seen a significant rise in monthly mortgage payments for our clients, we have had very few that have had to consider moving home to reduce their outgoings. The majority of clients have taken this as an opportunity to review their spending habits. Looking through bank statements every day, you soon realise how much people are now spending on what was once classed as a luxury: takeaways, eating out, endless subscriptions for multiple services... So many clients have simply reduced their outgoings by taking stock of where their money is actually going. "People live to their means" is often a phrase thrown about but in most cases it is actually true, whilst rates have increased these mortgages were originally stressed based on much higher interest rates than what they took out, so the affordability for most people is there and we are seeing them managing to absorb this increase by cutting costs they no longer need or use.

I deal with mainly first time buyers and have noticed my two and three year fix clients returning and going on to higher rates are either extending the term temporarily to compensate with a view to bringing it back down when rates fall after taking a shorter term product, mainly two years.

Or there are those who have been promoted or had pay rises in the last two or three years meaning they are able to cope with the increase as disposable has gone up so they are happy to keep the term the same

I have had not one client switch to interest only

The Government figures hide the reality of the pain being caused to many of higher monthly payments caused by increased rates. In 2024 we have observed a 324% increase in enquiries from homeowners struggling with their monthly payments.
For some of these, the new generation of monthly payment Lifetime Mortgages such as that from Standard Life Home Finance have been an alternative solution.
One of my clients (who has completed today) left her High Street lender who could not offer them terms to move to a fixed interest rate for life and a voluntary monthly payment.

I'm consistently amazed at just how well people are holding up in the world of newer rates. Technically lenders to assess whether they believe a client can still afford repayments if rates increase and this just goes to show how wise that is. Not that it makes the bitter pill of having to cut back on hundreds of pounds in discretionary spending any easier to swallow.

UK mortgage account holders have proven very resilient over the past 2 years of mortgage rate renewal hikes - however, I am worried that this resolve may well be weakening. We have been surprised by the number of what we would call good earners taking advantage of the government's Mortgage Charter options, particularly the Interest-Free for 6 months. The problem with this scheme is we are hearing back from members of the public that they have attempted to re-enter the scheme and are not being allowed further Interest-only periods from their lenders - this could lead to problems. It's clear that people have adjusted their living and spending arrangements to become more frugal with their money however this won't really work over the longer term - the storm is approaching we fear. Long forgotten are the stories of expensive new cars being ordered and luxury holidays being booked - battening down the hatches seems an appropriate explanation of what we are seeing from the UK.

During the period of time where we enjoyed ultra-low interest rates many peoples disposable income was used on things like gym memberships, Spotify premium, Netflix, Disney+, Paramount+, plus Amazon and however many more subscription services. Simply beacuse they could. On top of that many pepole changed their car every three years or so, enjoyed multiple holidays a year and essentially enjoyed their cash. The change to more a more normal level of interest rates has been a shock to many, but they have had the capacity to maintain their mortgage payments at these higher rates by giving up, or modifying, their specing on these little luxeries. People have stopped or changed their gym, they've decided a few adverts on TV or whilst listening to music are worth the reduced bill, their keeping their cars that bit longer and maybe only having the one holiday. These changes are individually small, but the combined impact has allowed people to maintain their mortgage payments.

Our clients are largely holding steady, and not shifting towards interest-only mortgages. Indeed, we've seen a handful extend their mortgage terms, but the vast majority are absorbing the rate increase as just another aspect of modern-day living by making necessary adjustments elsewhere to meet their new mortgage payments.

Clients are not managing higher mortgage interest rates well.
Contrary to what lenders or the Government say, my experience tells me the opposite. Clients have no choice but to pay the mortgage and to make drastic cuts in all other aspects of their lives.
Scratch the surface and you will see credit card balances are up, saving pots are being depleted, borrowing from family is on the rise, pension pots are being raided early, loans to consolidate debt are commonplace, downsizing to release money to live on, so mortgage arrears may be low, but don’t be fooled into thinking clients are ‘managing’.
Life is a real struggle for the majority of people so the sooner rates come down the happier, and more importantly the healthier, people’s lives will be.

I think everyone is just gritting their teeth and pulling themselves along each month. Its sad when you review with a client and they are litterally living month to month when previously, they were comfortable. Lets be honest, everyone with a mortgage is feeling the sting, or the worry of a re-fix. Rates may not be as high as the 80/90's, but wages are lower in relation and mortgages are much higher. I hope something happens to make things easier for everyone soon.