The size of mortgage taken out by first-time buyers Kieran Ellis, 32, and Jordan Stefanov, 29, will send shudders through many people. The couple borrowed about £450,000 in June to buy a £490,000 two-bed flat in Crystal Palace, south London – but they are relatively relaxed about the rise in interest rates.
A 0.25% rise in rates adds £54 to the monthly payments on a £450,000 loan. But like the majority of young buyers Kieran and Jordan have taken out a fixed-rate mortgage – in their case pegged at just 1.8% for two years – so the rate rise has no immediate impact on their repayments, which come in at a bit below £2,000 a month.
“Our monthly mortgage payments are pretty much the same as the rent we were paying for a flat in Kilburn. Interest rates are always a worry, but the reason we bought this place is that it wasn’t too much of a stretch above the rent we were paying anyway,” says Ellis, who works in marketing.
Jordan, a management consultant, adds: “In two years’ time we might see our payments rise, and we’ll have to cut back. But we don’t have any other large commitments, and our objective is to overpay each month and reduce the debt.”
The couple also have savings put aside to cover emergencies and potential rising costs.
Are they concerned that house prices could fall as rates rise? “We looked at more than 50 properties before settling on this. This is London and, yes, £490,000 sounds like a lot of money but it doesn’t actually get you a lot. And prices in this area of the city are still projected to rise,” says Ellis.
He says it is a part of the capital to which many of their friends have moved in recent years, and they are confident that it is a great location to buy.
Jordan came to Britain six years ago from Bulgaria and the couple began house-hunting before the Brexit vote. But he says he has secured his status in the UK irrespective of the outcome of the Brexit negotiations, so that is not an issue for their longer-term financial plans.