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‘My mortgage has gone up £500 – and now I’m stuck with it for five years’

Cassandra Davis - John Lawrence
Cassandra Davis - John Lawrence

When Sarah Marshall and her husband bought their forever home in 2018 they thought nothing of the 1.5pc rate of their five-year fixed mortgage.

But now, having remortgaged their three-bed detached house in Easton, Nottingham, with their interest payments soaring by three times what they were paying before, they realise what a great deal they had.

The couple, who fixed their £300,000 for another five years in January at 4.4pc, have seen their monthly payments increase by more than £500.

Previously they paid £1,485 a month. But this has now soared to around £2,000. As a result they have had to reassess their finances and make cutbacks where they can.

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Marshall, 48, says: "It felt like we were remortgaging at the worst time ever and we were in shock for around two months after the mini-Budget. We then had Christmas to pay for followed by significantly higher mortgage payments.

"We’ve stopped our gym memberships and cancelled the children’s activities, such as swimming, until next year. We’re having friends over, instead of going out to socialise, and I’m walking where I can instead of using the car. Instead of taking a week-long trip to Devon or Cornwall, as we would do this Easter, we’re just having a weekend away instead."

Mortgage chaos ensued following former chancellor Kwasi Kwarteng’s mini-Budget at the end of September, as lenders rushed to withdraw and reprice fixed deals.

On the day of the speech, the average two and five-year fixed rates were 4.74pc and 4.75pc, respectively, according to data firm Moneyfacts. By the following Friday, they had risen to 5.17pc and 5.1pc.

Despite soaring rates, many people coming up for remortgaging chose to fix or fear rates would rise even further. Since the autumn however, rates have fallen.

'We’re now seriously considering selling'

Publishing director Cassandra Davis, 32, remortgaged at the start of March at a rate of 4.34pc for five years, with her new deal adding an extra £200 to her monthly repayments. Her previous five-year fix was 2.9pc.

She and her husband are no longer able to renovate and repair their family home.

Davis bought her three-bed bungalow in Beenham, Berkshire, almost four years ago, she knew it needed work. She planned to remortgage this year and borrow an extra £150,000 to cover the cost of the renovations including a new roof and windows, insulation and a modern boiler.

However, they could not find a rate less than 10.5pc for the total £370,000 they would need to borrow.

"We were gutted after the mini-Budget. We wished we had applied for the planning permission and new mortgage sooner, even if it meant paying an early repayment charge," Davis says.

"We bought the house as a doer-upper. If I knew we weren’t going to be able to fix it up, I’m not sure we would’ve gone through with the purchase. It’s not the house I want for my children and we’re now seriously considering selling and moving somewhere else."

Last week City watchdog the Financial Conduct Authority (FCA) set out new mortgage guidance for lenders to support struggling customers or those worried about their payments because of the cost of living.

It estimates that 356,000 mortgage borrowers could face payment difficulties by the end of June 2024, on top of those already behind.

Separate data from the Office for National Statistics (ONS) suggests more than 1.4 million households due to remortgage this year will face higher monthly payments as a result of the sharp rise in interest.

Those that do have to renew this year will see their income shrink by an extra 3.1pc after tax, according to investment platform Hargreaves Lansdown. This is the equivalent of an 80pc rise of the average energy bill or £2,120.

Jinesh Vohra, from mortgage overpayment app Sprive, says the mortgage market has experienced a "significant shift" in the past 12 months.

"With interest rates increasing to 4pc and the housing market starting to slow down, many borrowers are feeling uncertain about their financial future. It is crucial to stay calm and seek expert advice when it comes to finding the right mortgage deal, as every situation is unique," he adds.

Mark Harris, chief executive of mortgage broker SPF Private Clients, says borrowers may wish to consider restructuring their mortgage in order to offset or mitigate the increase or overpay to reduce the debt and interest, if they have spare savings. They could also extend the term of their mortgage to reduce their monthly outgoings or transfer the mortgage (or part of it) onto interest only.

While there are pros and cons to these options, he suggests they could be applied in the short term. Homeowners can always remortgage back to their original terms when their financial situation improves.

"Borrowers should seek advice from a whole-of-market broker before making any changes as they will be able to advise as to the best course of action for your circumstances. If you are in serious financial difficulty, you should engage with your lender as soon as possible," he adds.