Bingley in West Yorkshire is more than 200 miles from Threadneedle Street in London, but the decisions being made at the Bank of England are hitting very close to home for the clients of the town’s branch of the Mortgage Advice Bureau.
This week, brokers there were busy dealing with the fallout from the Bank’s recent interest rate decisions, and their clients’ concerns about what might come next.
“It’s not just that there’s lots of deals coming to an end but that people are more aware that they need to look at [their mortgage] three, six, nine, 12 months in advance,” says Andrew Milnes, one of the brokers based in the market town.
“I’ve had conversations with people in the last week whose deals don’t end for 18 months, but they want to know what the landscape will be like in 18 months’ time.
“That’s crystal ball stuff, but I say if I was doing it today for you, this is what it would look like, with the caveat that in 18 months I don’t think it will look like this, but I can’t promise you. Prepare yourself, this is the absolute worst that it could be.”
Bingley is a name associated with past mortgage crises – in 2008, the local building society turned bank Bradford & Bingley was one of the lenders forced into national ownership when its interest in sub-prime loans caused it to collapse.
The brokers based in the town are now finding themselves at the centre of another crisis.
Like other brokers around the country, they are facing an avalanche of clients inquiring about remortgaging, with some unable to afford the payments, as homeowners grapple with soaring interest rates.
As the Bank of England has increased the base rate – with another rise from 5% expected next week – mortgage rates have increased, and some homeowners are facing increases of hundreds of pounds a month.
The latest forecast from the central bank showed that almost 1 million UK homeowners will be forced to spend at least £500 more a month to cover mortgage payments by the end of 2026.
Milnes says that previously the branch, which mainly has clients in West and North Yorkshire, saw a 70/30 split in the type of business it dealt with, with more customers asking about new mortgages and a smaller number remortgaging. As rates have increased, this has flipped, with about 70% of business now remortgage applications.
The people who are mainly affected by the rate increases are those who took out large mortgages at the top end of their budgets, according to Milnes. He says as a result they have found that most people are still able to afford the payments after making cutbacks to discretionary spending, such as holidays, school fees and eating out.
“I’ve not had many people where it’s not affordable, but I’ve had quite a few clients where they’ve had to make a lifestyle change, so the Costa goes out the window, the golf club fees disappear, the private school has had to change,” Milnes says.
“What I’m finding more than ‘not affordable’ is that it’s ‘not nice.’”
He adds: “There’s a demographic of people who made the move when rates were low and possibly couldn’t really afford it.
“It’s those who made an aspirational move, for example, from the traditional three-bed semi which was a lovely family home to a four-bed detached with a bit of a garden in a slightly nicer area. When payments were really low, it worked for them. And some of those people will have only taken them on interest-only. Those are the ones it is really kicking now.”
He says: “I can count on one hand the customers we’ve had real fears about, where we think they might not be able to pay their mortgage. And we’ve no magic wand, we can’t pay it for them.”
For these, he says, “What we can do is signpost what they need to do. The first thing you need to do in that instance is talk to your lender, don’t bury your head in the sand.
“There might be a bigger picture including other debt, so we might have to talk to Stepchange or CAP or Citizens Advice on their behalf. There might be other creditors they need to talk to.”
Each broker at Bingley’s Mortgage Advice Bureau has examples of clients facing hundreds of pounds of extra payments a month.
One mentions a parent who was entering into a joint mortgage with their child to help them buy a home. The completion of the new-build property was delayed so the deal they agreed last year – a five-year fixed-rate mortgage at 3.69%, costing £1,501 a month – expired. The best deal available to them now is a two-year fix at 6.29%, costing them £1,900 – an extra £399 a month.
Another client was paying £731 a month on their 1.89% interest mortgage, but found they would have to pay £1,191 after remortgaging as the interest rate soared to 6.35%.
Despite the most recent base rate increase, average mortgage rates dipped last week after the most recent UK inflation data came in below expectations, fuelling hopes that the crisis may have peaked and next week’s Bank rate rise may be the last.
Vicky Murray, 26, a self-employed barber, who rents a property in Keighley, arrives for a meeting with an adviser, hoping to buy her first home. After running through her finances, she is told she can expect an interest rate of 6.68% on a five-year fixed-rate mortgage of about £63,500, with monthly payments of £408.
“It is what it is,” she says, explaining why she was opting for a longer fixed deal despite the high rates. “If I’m happy with the number now, then it’s fine.”
