Therapy or paying the bills: Choices facing desperate homeowners amid mortgage time bomb

For Christian Gordine, memories of the Covid pandemic are bitter-sweet.

While restrictions were placed on the public, he and a friend finally, after years of toiling and saving, managed to achieve their dream of getting on the property ladder.

But he, like millions of other homeowners across the country, is sitting on top of the mortgage ticking time bomb, waiting for his monthly payments to explode.

Mr Gordine, a 33-year-old filmmaker from Wales, bought a two-bed flat in Seven Sisters, Haringey, for £545,000 on 60 per cent equity in January 2021.

When he and his friend first took out the mortgage they were paying an interest rate of 2 per cent.

Refixing this year, the best deal they could get was 4 per cent, meaning his monthly payments are due to sky-rocket by £200 per next month - on top of increased energy and food bills.

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“The difference between what I was paying before and what I will have to spend from next month is the same amount I spend on therapy,” Mr Gordine, who lives with depression and anxiety.

“This is against the backdrop of my pay remaining frozen and obviously the cost of living crisis, which is affecting everyone”.

Although Mr Gordine says he will have to rein in his spending and make difficult choices about his health care, he still feels “lucky”.

“The Covid pandemic enabled me to make one final push to save and get my deposit together. This, along with the stamp duty holiday, made owning a home possible.

“I feel like I’m in a privileged position because although my payments are increasing, I will manage to get by with some adjustments and, at the end of the day, still own a property.”

“We can’t forget that renters are just as exposed - if not more so - to this crisis than people who are already on the property ladder.”

With interest rates and mortgage costs on the rise, many buy-to-let landlords have passed on the additional costs to their tenants, which is in turn driving up rents in cities like London, where prices are at record highs and the market even more competitive than usual.

According to figures published by online estate agent Zoopla earlier this week, the average rent in the UK has hit £1,126 a month and £2,000 in the capital.

London remains the region with the fastest-growing rents, which are up 13.5 per cent.

Hannah Wynne, a born and bred Londoner living in a shared four-bedroom house in Hackney is, at the age of 35, keen to move progress to the next stage of her life.

“I work long hours, often into the evening, so it would be nice to live in a smaller place to have more head space and downtime” she says.

“At my age I feel like it’s not too much to ask to have my own place - even if that’s just to rent.

Ms Wynne, who works as a hairdresser, says she earns good money but the rental market has become so extortionate that she is struggling to find a new home.

With her work, life and friends in London - her home - Ms Wynne doesn’t want to leave the capital but has for the first time ever considered moving elsewhere.

At recent viewings, she has been up against “scores” of other renters frantically searching for a home but lost out on each occasion following bidding wars.

“I feel completely trapped,” she says. “We’ve been told in the past things like not to ask for pay rises because it will fuel inflation.

“But with landlords they get to just jack up rent at the drop of a hat and people have no choice but to pay. Where is the fairness in that? The power imbalance between landlords and renters is completely wrong.”

Today the Bank of England raised interest rates for the 13th consecutive time to 5 per cent in a bid to tackle sky-high inflation, which is proving to be hard than expected to bring down.

Office for National Statistics data published on Wednesday showed that the Consumer Price Index remained frozen last month on 8.7 per cent.

May’s headline figure, higher than economists had predicted earlier in the year, dashed hopes of a fall in inflation for the third consecutive month.

Mortgage lenders, after months of calm following Liz Truss and Kwasi Kwarteng’s disastrous mini-Budget, began increasing their prices at the end of last month and the trend has continued into June, with a flurry of activity in the market this week which saw deals being pulled and reissued at higher rates.

Lenders had already priced the Bank’s hike and earlier this week figures showed that the average cost of a two-year fixed mortgage deal had risen above 6 per cent for the first time since December.

Homeowners on tracker deals, meanwhile, have already been clobbered by rising interest rates.

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Polling published today by the StepChange debt charity revealed that 45 per cent of mortgage holders, equivalent to 6.9 million UK adults, have already found it difficult to keep up with bills and credit commitments in the last few months.

The new figures show that two fifths of mortgage holders (40p per cent) are showing at least one sign of financial difficulty, while one in ten (10 per cent) mortgage holders are estimated to be in problem debt.

Michael Coupe, 54, says his mortgage costs have trebled from £275 to £700 per month.

He bought a house in Chesterfield and runs a mini-bus company and has been forced to access some of his pension early to cover the additional costs.

“We’ve cut down on absolutely everything to make it work, and the plan with StepChange means that my other debts are being looked after for now,” he says.

“We don’t even have insurance anymore, so I really hope that nothing bad happens while we’re in this difficulty.

“We’ll just try and keep going until we get a knock on the door. My son is coming to the end of his fixed term in August and I have no idea what he’ll do.”

Bill*, a 32-year-old public sector worker from Yorkshire, said on current projections his mortgage costs could increase by as much as £500.

“I already shop at Lidl and Aldi, I got rid of Netflix, so what more am I supposed to do to cut cost?" he asked.

Bill, who lives with his partner and says he hasn’t had a decent pay rise in years, said he is two years into a three-year fixed deal which is fixed at 1.9 per cent.

“The prospect of what’s coming down the line is terrifying,” he said. “It’s worse knowing we’re a year away because we don’t know if things will get even worse by the time our deal has finished.”

He says his utility bills have already doubled from  £70 to £140.

“Where do people think we’re going to get the money from to do pay that?” he says of the looming mortgage hike.

“We joke about Netflix being a luxury but when you work for 8 or 9 hours a day, you need something positive for your mental health.

“We’ve now spoken about not going on holiday this year. That may sound like a luxury, but we work really hard all year to take that break.

“I feel guilty because I’m not the poorest in society, so if it is this bad for me then I can’t imagine how bad it is for a single-parent household.”

Vikki Brownridge, CEO at StepChange, says “in a short space of time” the charity’s mortgage advice team has seen a sharp rise in the cost of borrowing among its clients, who are facing on average an approximate £300 jump in monthly payments for a typical sized mortgage now compared to before September 2022.

“While our figures show that increased pressure is not yet bringing more homeowners to debt advice, the risk is there as people cut back on spending or turn to credit to keep up with essentials and the wider cost of living,” she said.

“The government and lenders must be attuned to this issue with millions of people due to experience eye-watering rises in their monthly mortgage payments.”

Prime minister Rishi Sunak has made it one of his missions to tackle inflation, which is driving the uptick in mortgage costs.

So far he and Jeremy Hunt, the chancellor, have ruled out direct interventions in the market over fears it would further fuel rising prices.

Mr Hunt has said he will meet lenders and banks this week to see what support they can provide for people in arrears and struggling with expensive mortgage payments.

*Name has been changed