Following the ONS report published this morning, Newspage has collected and shared the thoughts of Advisers and brokers. Many are concerned about the ever-increasing impact of housing costs and the long-term effect they may have as we move into the new year.
Scott Taylor-Barr, financial adviser at Shropshire-based Carl Summers Financial Services: “There is no doubt that many people are concerned when we sit down and look at the costs of a new mortgage deal, compared to one they are about to roll off. An increase of a few hundred pounds per month on an average mortgage is not uncommon. For many, this has led to a conversation about extending their repayment term to help manage that cost. If they were prudent when rates were low and shortened their repayment term, this is quite simple, but for those that chose to take the low rates as cash in their pocket it can be much harder. For that latter group, it is often a case of talking through their expenses and looking at what could be cancelled or reduced or even considering if they need to revisit the age at which they ideally want to retire.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “Only 12 months ago, you could remortgage onto a sub-one percent fixed rate. Now, even if you have 50% equity, the best you can get is 3.49%, a 250% increase. Fix for longer than 2 years or have a smaller deposit and these rates spiral. A 5-year fixed rate with a 10% deposit will now cost you 4.89%. As the recession worsens, gilt rates are likely to increase so I expect peak mortgage pricing to be in late Spring. It’s difficult to see what happens next as the Bank of England base rate will reverse in the summer, but the market will dictate government borrowing remains high as confidence in the country diminishes. Landlords are undoubtedly passing on these costs to renters and average rents are hitting people’s disposable income hard. I expect a homelessness crisis come the summer.”
Mitul Pandya, Managing Director at the Stanmore-based accountants, Charterwells: “For millions of small business owners, the squeeze on household finances is being exacerbated by the squeeze on their profits. They are seeing a sharp rise in their tax bills and, having recovered from the pandemic, their payments on account. This comes at the same time many have Covid loans to repay. There is less money in their business at the exact time many business owners have higher mortgage or rental costs, not to mention energy and food bills. It makes real fiscal sense for HMRC to consider offering small business owners more flexibility for their next payment on account. Helping household cash flow via tax flexibility may help to avoid a housing crisis and forced sales due to significantly higher mortgage and rent payments. HMRC has also increased interest on late tax payments, which will hit people’s finances even harder.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “Self-employed mortgage applicants can typically borrow slightly lower multiples of income than those in employed roles anyway, so the increased cost of living and sharply rising mortgage rates can make it tricky for directors, contractors and the like to borrow the amount they want. The sector of the mortgage market I think will be most affected is people with adverse credit. Many will face mortgage rates of 6%-8%, depending on the severity of their credit issues, and getting a mortgage or remortgage will be simply unaffordable. However much lower house prices, which I think we’ll see over the next couple of years, will help improve affordability.”