Mortgages timebomb for Northern Ireland homeowners, says expert

The "race for space" during the Covid-19 pandemic fuelled sales of larger, more expensive homes, says an expert

Northern Ireland is sitting on a "mortgage timebomb", according to the property expert who compiles the Ulster University house price index.

Michael McCord said many people bought larger homes during the Covid pandemic, influenced by low interest rates.

He said those with short-term, fixed-rate mortgages would soon face higher repayments when their deals expire.

There was a significant rise in house sales in Northern Ireland between the end of 2020 and the middle of 2021.

However, interest rates have risen in recent months and this week the Bank of England warned it may hike interest rates even higher in an attempt to curb inflation.

Many mortgage lenders are already raising interest rates or have withdrawn products before putting them back on the market at higher rates.

Speaking on the BBC's Good Morning Ulster programme, Mr McCord said that would lead to a significant increase in repayments for homeowners who are due to move to a new mortgage deal.

"We have consumers coming to the end of their terms and a core issue is that they actually might not qualify or pass the affordability checks with their current lender for their current property on their existing loan, which would be perilous," he explained.

'A perfect storm'

Mr McCord warned that some first-time buyers could be "locked out of the market and locked into the private rental sector" because of the rising upfront costs of getting a mortgage.

He also suggested there was "bit of a perfect storm" that could lead to significant falls in property prices.

But he said that there may be some protection from that in Northern Ireland due to the limited supply of homes for sale.

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A number of UK mortgage lenders have temporarily halted mortgage offers for new customers amid uncertainty over interest rates.

Some experts have forecast that interest rates could reach 5.5% or even higher by next spring.

Family cutting back as mortgage jumps

Claire Harper from Coleraine, County Londonderry has just re-mortgaged her family home and has seen the cost jump by £140 a month.

"We bought in January 2021 so our two-year fixed (rate) was coming to an end at the end of the year," she said.

"We decided to try and get a deal early and I feel lucky now. If we'd left it until this week it could have been another £100-£150 a month."

The mother-of-two said she would have to cut back on some luxuries in light of the extra mortgage cost.

"Thankfully, we're both working full-time. We do have childcare to pay and that is a big concern. But we were fortunate that we could re-mortgage in advance of this.

"There's nothing you can do now, but hope for change," she added.

The uncertainty is already having an effect on the mortgage market in Northern Ireland, according Owen Peden, managing director of the firm PropertyPal Mortgages.

"We've seen mortgage lenders pulling rates at short notice and repricing," he told BBC News NI.

"It's really difficult - we might be having a conversation one week with someone coming to an end of a two-year fix and it's going up £50 a month.

"Then the next week we have the same conversation with someone but it's going up £80 to £90 a week."

Mr Peden said that, coupled with the overall increase in the cost of living, people were becoming more concerned about their housing costs but added they could take action.

"We need to educate people to get on the ball and talk to a mortgage broker," he said.

"If your fixed rate is coming to an end in six months, act quick to secure the best rate - prolonging it doesn't help.

"It's unlikely it's going to get better - I don't have a crystal ball but it looks like rates will get higher."

Interest rates were cut to a historic low at the start of the pandemic in early 2020 due to fears over its effect on the UK economy.

However, rates have gradually risen this year with seven consecutive hikes since January 2022.

The rate now stands at 2.25%, which in historical terms is still comparatively low.

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