My friend’s mortgage payments will rocket by £1,500 per month: MAGGIE PAGANO on the crunch hitting borrowers
My phone has been ringing non-stop over the last few days. Friends and family have been calling in a panic because their fixed-rate mortgage deal ends this year and they are negotiating to re-mortgage.
It’s crunch time. They want to know whether to fix for another two years, go for five or move to a variable rate in the unlikely hope that interest rates will come down again next year. Tough choices.
Giving sensible advice is equally tough. Even the Bank of England can’t peer that far ahead with any honesty but what is sure is that higher rates are the new normal.
What is also sure is that the Bank’s medicine is now working rather too well and, as we have been arguing in this column, it is now time to stop raising rates and wait for the drugs to have their full impact. But don’t count on it.
Remortgaging misery: More and more people are in a panic because their fixed-rate deal ends this year and they are negotiating to re-mortgage
Adding to my callers’ anxiety is that renegotiating is proving much harder as lenders are being far more rigorous in their credit scoring hoping that homeowners will be able to avoid defaults or, heaven forbid, negative equity if house prices keep sliding. And the new monthly payments are going to be gigantic.
One couple have a £250,000 mortgage so they will be paying another £300 or so a month at the 6.4 per cent rate being offered.
A young family is facing an increase in mortgage payments from £2,000 to £3,500 a month. Another friend is going to see her payments rise by a whopping £1,500 to £4,000.
Admittedly, it is a whopping mortgage, but on the ridiculously cheap 2.5 per cent she has been paying, it was affordable.
These are huge jumps in outgoings, so you can see why lenders are scrutinising every penny of income coming in and going out to ensure homeowners can afford the new payments.
These are just a few examples among thousands. Around 640,000 households are on a fixed deal ending in the second half of this year. And there are thousands more who come off their deals next year.
Many households have already cut back. Retail sales figures for July out yesterday showed by just how much.
Aggravated by bad weather, sales rose by a paltry 1.5 per cent, down from 2.3 per cent in June, well-below the three month average and the lowest for 11 months.
The latest numbers from the British Retail Consortium (BRC) and KPMG also show that food spending remains strong, with sales rising 8.4 per cent and beating the 12-month average growth of 7.8 per cent.
However, the BRC monitor also showed the extent to which food retailers are price-cutting wherever they can, and promoting heavily to lure customers into their stores – a positive sign hopefully for next week’s inflation figures which should be coming down quite sharply to below 7 per cent.
Consumers are shopping around far more than before – often in several stores at a time – to seek out bargains. (Here’s my best tip for tea-drinkers – B&M sells a jumbo sack of Yorkshire Tea for the same price as a big box in most supermarkets).
There was one big surprise though. Spending on streaming services and going to concerts was up 16 per cent year on year.
It is cheering to know that despite the miserable weather and the depressing cost-of-living crisis, we are still spending stoically on enjoying ourselves. Quite right too, even if it means eating baked beans before you go out.
Poldark on fire
Ross Poldark would be astonished – new mines, secure financing and jobs.
Cornish Lithium is being backed by the UK Infrastructure Bank and Energy & Minerals Group alongside existing investors with a £53million package.
And there is up to £168million to come. This means it can start mining lithium – an essential component for making EV batteries – for commercial production.
And it is good for the region too, where mining has such deep roots. The first tin mining dates back to around 2100 BC, while the Romans made themselves rich trading tin and copper from the mines.
It is even said that these trading relations with the Romans saved the locals from military invasion, helping to ensure their fiercely independent spirit.
Wilko’s worries
Fingers crossed that Laura Ashley owners Gordon Brothers can stitch together a rescue package for Wilko.
Inevitably, any deal is likely to mean some of its 400 stores being closed and job losses among the 12,000 workforce. Yet losing some jobs has to be better than closure.
