Splitting time between North Lambeth and Maida Vale can hardly be classed as a long-distance relationship.
But, as a thirty-something couple wanting to live together, finding themselves suddenly priced out of doing so when interest rates spiked last year was still a blow for Kristiane Clear and her partner of four years, Michelle Rowihab.
“We are extremely excited to be able to live together full time,” says Rowihab. “We can’t wait to build a home together.”
But Clear, 37, a marketing consultant working with Apple, and Rowihab, 38, an architect and founder of a trauma coaching business, found that after Kwasi Kwarteng’s mini-budget in October 2022, the mortgage chaos that ensued put their dream of sharing a home on hold, especially since they both work for themselves.
“Getting a mortgage last year would have been too much for us with the interest rates.”
“Getting a mortgage last year would have been too much for us with the interest rates, especially as we’re both self-employed. We thought long and hard about it and it didn’t make financial sense for us, so we decided to take our time,” says Clear.
“It would have been very difficult for us to make this happen,” agrees Rowihab.
“We would have had to significantly lower our budget, and compromise on the size of the property. We ruled out stretching ourselves up to £1.1 million and now we’re seriously considering it.”
The couple planned to buy in Surbiton with a maximum budget of £1.18 million, a sum that seemed well over their heads at last year’s hefty mortgage rates, especially given their slightly more precarious status as freelancers.
“What makes it even more complicated is that we are self-employed in different ways,” says Clear. “I’m contracted through companies and have a limited company, and Michelle does everything through individuals, so it’s two different types of self-employment.”
“After Covid, a number of banks significantly tightened their criteria for self-employed people.”
Rowihab and Clear’s mortgage adviser, Kerry Nash of Marble Financial Planning, has found in general lenders’ position towards the self-employed is softening.
“After Covid, a number of banks significantly tightened their criteria for self-employed people, which made borrowing much harder at this point if you happened to be self-employed or a limited company,” she says.
“They have now realised that they had been missing out on a very large market and have since significantly improved their criteria, which has meant self-employed people can now borrow much more.”
In addition, a fortnight ago the Bank of England kept rates at 5.25 per cent, the fourth time they’ve been held after 14 consecutive rises in a row.
“The banks are fighting to lend and they have reduced their interest rates significantly.”
While holding a rate steady doesn’t make for exciting headlines, the general consensus is that the worst of the rate rises is now behind us and the mood of the mortgage market is becoming increasingly positive.
“The banks are fighting to lend and they have reduced their interest rates significantly over the last year,” says Nash.
“I was seeing rates starting from six per cent going up to nearly nine per cent at one point… I am happier to see rates starting with a three and a four now.” And so, after a year of waiting, the couple are now looking at rates for a 35-year mortgage that have dropped from 4.6 per cent last year to 3.8 per cent and falling now.
According to Nash’s calculations, this could knock almost £450 a month off repayments on a £1.2 million home, assuming a 25 per cent deposit and a loan of £900,000.
This softening of criteria has helped Clear and Rowihab up their budget so they can afford a house in the area they want, says Nash: “With the bank improving their affordability calculations for self-employed people and making significant rate decreases, they have now been able to buy an even better property than the one they initially thought they could achieve.”
The couple are now looking forward to taking their next step on the property ladder — and in their relationship — this year.
“I look forward to coming home from work and not being home alone any more and finally spending quality time together every day,” says Clear.
