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Who will be affected the worst by mortgage chaos?

Journalist: Grace Gausden, i newspaper

ended 28. September 2022

Which homeowners will be affected the worst by ongoing mortgage chaos? Will it be those who bought new builds and perhaps overpaid for them (Help to Buy) or will it be those who took advantage of the last stamp duty cuts, putting all their savings into a property?

How difficult will these people find it and is there anything they can do?

12 responses from the Newspage community

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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
The homeowners who will be worse affected will be those who took out cheap rates at high loan to value lending during the pandemic, who are soon coming to the end of the fixed rate. The stamp duty incentive encouraged people to move to larger homes and now they are burdened with a high mortgage payment that they may not be able to afford when they remortgage. Rates have already doubled for a lot of people who have managed to secure a new rate in the past few weeks and that’s without the next increase we expect to be announced from those lenders that have withdrawn products over the past 24 hours.
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Rob Peters
Principal at Simple Fast Mortgage
Highly leveraged borrowers will be worst hit as they have the least financial room to accept higher costs. This is where high income multiple lending will be called into question. This is particularly those borrowers whose financial circumstances have worsened. Perhaps they took on additional debt following the mortgage, or it could be their income has reduced. Either way, with such a tight affordability metric, to start with a 6% interest rate is going to make affordability tough for many.
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Mike Staton
Director at Staton Mortgages
There are a lot of people who will be affected by payment shock over the next few months, i believe people who have a Help to Buy loan that matures as well as their fixed mortgage term coming to an end will be hit the hardest, not only will they see their interest rates increase to a level much more than they possibly anticipated, but they will also need to start paying back the interest on their equity loan. Being a british homeowner isnt a dream at the moment. I think we are moving forward to a downsizing market as people who have gone to maximum affordability will struggle to handle the current increase in monthly outgoings
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Just like most crisis, this won’t be felt evenly. Those wanting to get on the housing market will be most effected as their affordability will be hit by higher rates, even if they are lucky enough to have a deposit. Those already on the ladder will see it being pulled up behind them.
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Imran Hussain
Director at Harmony Financial Services
It's difficult to say which exact sector as it's all down to personal circumstances but as a general rule it will be those who overborrowed in a low rate market thinking the low rates will be here forever.
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Mark Robinson
Managing Director at Albion Forest Mortgages
Currently the mortgage chaos will be affected by those trying to put offers in on property. Imagine having a mortgage in principle, having an offer accepted and then being told "oh sorry, the lender you want to use have zero products right now". They need to pull it together and not react until there is something to react to.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
Undoubtedly it's going to be the guys who stretched themselves to the limit financially to buy the 'next stepper' property. Quadrupling the rate of interest they pay is going to make the repayments unaffordable leaving them no other option than to sell and downsize. That in turn will only push prices for the sorts of properties within reach of a first time buyer as they don't just compete with other first time buyers but others on the housing ladder.
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Robert Payne
Director at Langley House Mortgages
Anyone looking to purchase or remortgage in the current climate is going to be facing expensive levels of interest but those who are likely to see the largest impact are those which have borrowed to their maximum capacity, on the lowest rates in history and are now looking to remortgage. Other borrowers facing difficulties will be newbuild owners who took Help to Buy equity loans 5 years ago. Not only will they be facing higher interest rates for their existing loan amount, they will also have to choose between borrowing more to pay off the equity loan or start paying interest on that amount as it will now be out of it's interest free period.
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Anil Mistry
Director and Mortgage Broker at RNR Mortgage Solutions
The homeowners affected the worse will be those that fixed in the past two years, at probably ultra-low rates of sub-two percent, and whose products are set to end in the next twelve months. It is these homeowners that are going to see their borrowing costs jump to what now looks like the high four percent, or even a rate starting with a five. Then the question is, can they afford the increased payments, or is there a need to extend the mortgage term to keep the payments affordable?
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Sabrina Hall
Mortgage Adviser & Protection Adviser at Kind Financial Services
I feel that many who purchased a property during the covid stamp duty relief stretched themselves to keep up with the increasing house prices and the speed at which properties were selling put additional pressure to make quick decisions. In addition to that we were working on a budget at that time when our general costs were lower. In addition to the cost of utilities being lower than now people weren't going out or eating out as much. The result is that the mortgage that felt perfectly affordable at the time now it harder to pay and then the potential of increased mortgage payments is terrifying for some clients.
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
I feel for first time buyers at the moment, many have scrimped and saved to afford to buy their first homes, now mortgages are very quickly becoming unaffordable coupled with the cost of living many are left feeling like they will never afford their own home
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David Robinson
Co-Founder at Wildcat Law
Watch out for highly geared property portfolios! Anyone with a number of buy to lets with hefty borrowing will no doubt be very nervous at the moment. With returns already squeezed by historic changes in tax treatment they now face the spectre of significantly increased mortgage interest rates. This in turn they will try to pass onto tenants who are probably already struggling under the cost of living crisis. If they are lucky the tenants will pay, if not they face the double whammy of finding money to pay the mortgage whilst at the same time the legal fees to evict tenants and find new ones able to pay. The old chicken and the egg scenario is now the Landlord or the Tenant scenario, regarding who goes to the bankruptcy courts first.