Like many young couples, Chris Smithers and his wife were hoping to have another child within two years of their first. But a huge impending increase in their mortgage payments has put paid to their plans.
When their existing fixed-rate deal ends in April next year, Smithers fears their mortgage repayments could more than double from £1,880 to £3,800 in the worst-case scenario.
His wife, who has just returned to her job, will essentially be working to pay for the increase and childcare.
They had been thinking about trying again for a baby to give a two-year gap between the children, but that would mean “hitting maternity leave when we have really high mortgage payments and my wife’s money tapers off,” says Smithers, who lives in Medway, Kent. “We will give it another two years and hope all of the body clocks are OK, and we can still do it. But it is a massive emotional toll.”
Rising interest rates, and the resulting dramatically higher mortgage repayments, have meant homeowners have had to find ways to pay the bills – often by drastically changing their spending and sacrificing the plans they had made.
On Thursday, the Bank of England raised interest rates for the 14th consecutive time to 5.25% – adding to the strain on households already struggling with soaring home loan costs.
Observer readers have told of turning to vegetarian diets, forsaking holidays, buying from the basic ranges in supermarkets and cancelling gym memberships to make ends meet.
Elizabeth James, a 41-year-old married mother-of-one from Leicestershire, recently renegotiated a fixed-rate deal that means she has to pay an additional £140 a month – about 25% more than before. Now aiming to end her mortgage as soon as possible, she overpays as often as she can – sometimes handing over sums of less than £1.
“I do it every day. If my bank balance is £179.15, I will transfer that 15p to the mortgage. We have overpaid, within three years, by about £4,500 in dribs and drabs,” she says.
James adds: “I am very careful about what we choose to spend our money on. I don’t like to waste any money. Every penny of an overpayment makes a difference.
“We have saved a lot on food, and use Olio [an app that lets you pass on what you no longer need to people who live nearby] to save money, at the same time as helping the planet. Almost everything we buy is secondhand, and a lot is sourced free from recycling sites.”
Leslie Peters, from Saffron Walden in Essex, expects her repayments to go up by about £900 at the end of the year when her current fixed rate ends, and she has been making preparations. A new car she bought on finance was sold and replaced with a secondhand one for £5,000, a foreign holiday has been replaced with one in the UK, and nights out have been curtailed.
“Before, I would have taken the old clothes to a charity shop, or given them away on Facebook. Now I’m starting to put them on used clothes marketplace Vinted,” she says.
I am very worried about the possibility of continued rate rises. I have contemplated selling my flat to manage a cost which is increasingly unaffordable
When the fixed rate on her north London flat ended last September, Heather West, 30, found repayments nearly doubled to almost £1,900.
“I’m going out less, eating less, drinking less – almost not doing these things at all,” she says. “I’m budgeting on a day-by-day basis. I am very worried about the possibility of continued rate rises. I have contemplated selling my flat to manage a cost which is increasingly unaffordable, but the rental market in London is equally expensive, so it feels like lose-lose. I’m completely at the mercy of market forces.”
In Ipswich, Andrew Anderson and his partner do not have a car or children, but see the upcoming rate increases as taking all of the “slack” out of their budget.
His doctor has recommended he reduces his working hours due to his ME, but he feels he has to teach full-time in order to finance the upcoming higher repayments, especially if they try to move up the property ladder to a slightly larger house.
“We live quite a modest life. The doctor says I should work 60% of my hours. I currently do 90%, but I’m going to go back to 100%. The numbers don’t add up otherwise,” he says.
Even if his health suffers, he says he has no choice, or he and his partner will have to give up on the aspiration “of moving to a slightly nicer house”.
Smithers says the need for him to shop at more affordable supermarkets means he is not able to support small local businesses as much as he’d like. “We’re not spending in little shops and buying coffees, or going to the local butcher because we’re buying all our meat from the bargain bins, which is not something we want to do.
“We want to spend where we live, and that becomes really hard when you have to make tough choices.”
All names have been changed
