Don’t ask Adam Fraser, 42, and his wife, who bought their £7 million house in Berkshire in July last year having secured a mortgage in the January. “It was at the tail end of when there were still good deals to be had,” says Fraser. “We passed our affordability test with flying colours and so I had no problem buying at the top of the market.”
At the time, Fraser was a partner in the start-up he had co-founded and received hefty dividends twice a year with which he was planning to pay down his £5.25 million mortgage. Of this, £2.75 million was fixed for five years at 1.49 per cent and £2.5 million was on a variable rate, which was then 1.89 per cent. “I genuinely thought that I’d be able to pay down the variable side of my mortgage really quite quickly,” says Fraser. “As it turned out, that was the worst decision in history.
“I remember my mortgage advisor looking at me and saying, ‘Are you serious?’ But it didn’t cross my mind that rates would go up as steeply as they have. And it’s not like I’m reckless. I have worked in finance for 25 years, so I’m more financially “literate” than a layman. I had a contingency – I knew that we wouldn’t be struggling with payments even if the variable rates went up to 3.5 per cent or 4 per cent. The trouble is that now they’re around 7 per cent.
“The current situation is, well … a little painful.”
Fraser’s monthly mortgage payments have gone up from £8,300 a month to £20,000. “If things were to carry on this way, we would be looking to pull our three kids out of school – which costs us £45,000 a year – and possibly be looking to sell the house too.”