One of the distinctive features of a Louis de Bernieres​ book is the strength of the characters. Just think of Captain Corelli's Mandolin, that glorious and heart-rending wartime romp on the Greek island of Cephalonia, crammed full of people with energy and emotion brilliantly brought to life.

It wasn't always thus, at least not according to the British novelist's agent. De Bernieres spent several years teaching English as a foreign language in Colombia, out of which emerged his Latin American trilogy of novels. While he concedes the books were very much driven by narrative, he hadn't expected what came next.

"My agent said to me, quite upsettingly, Louis, you're not very good at character, are you? I thought, what? I'll show you. So I wrote Corelli. She has never commented on it since and I assume that she's now reasonably satisfied with my characters. But if it wasn't for her pointing that out I would have been a quite different writer, I think."

There are plenty of characters bustling through his new novel, The Dust that Falls from Dreams, about which he will no doubt be talking when he delivers the address on the opening night of next month's Melbourne Writers Festival.

It begins at the turn of the 20th century with the death of Queen Victoria and the beginning of that golden period, the Edwardian age, that was obliterated by the horrors of the Western Front.

His focus is the McCosh family – father, mother and four daughters – and how they negotiate the changing circumstances, personal, political and social, as the years go by.

In this first volume – it's planned to be a trilogy – eldest daughter Rosie gets engaged to her next-door neighbour, Ashbridge Pendennis, one of three boys recently arrived from Baltimore. On the other side, live the half-French Pitt boys, Daniel and Archie.

But Ash is an early casualty of the war, and this is where the book gets personal for De Bernieres. The character's name – and Ash's lingering presence remains a significant one throughout The Dust – comes from the name of his own grandmother's fiance to whom the book is dedicated: "If not for his death, I would have had no life."

This was the starting point of the book. "It's always been a sort of shadow over our family. My grandmother didn't marry the man she really loved and never really got over it. My father said the day she died, she was reading his old letters.

"It is [a sad story] and I actually feel quite bad about existing at all because I wouldn't unless he had not been killed. The other thing is my parents met in Germany after the Second World War when he was in the British Army of the Rhine. So I actually wouldn't exist if it hadn't been for Hitler and Kaiser Wilhelm. I find that I owe my whole existence to German megalomaniacs quite disturbing."

His grandfather subsequently disappeared from the family's life – they had no idea of his whereabouts for years - but he turned up dead in the Rocky Mountains at the age of 96. De Bernieres went to Canada to find out his side of the story from his friends, or what friends were still alive. "I thought I could use his life as a scaffold for a trilogy."

He is quick to point out, however, that he won't be sticking to the truth. "That's not what a novelist's job is. I am going to tell it with as many great lies as I can think of," he says. "Sticking to the literal truth has a terrible effect if you're a novelist. You're talking about historical background and what you're looking for is metaphorical or poetical truth or virtual truth – something like that."

The Dust is the first time de Bernieres has tackled England as a subject with such substance. He has previously written Notwithstanding, a book of interlinked stories set in the Surrey village in which he lived as a child - "extremely English" – but sees this as much bigger.

"I had trouble when I was younger in seeing how particularly interesting my own country is. I could only see it in other countries and cultures. I was actually enlightened by a Frenchman who told me that England was the most exotic country in Europe. I said why and he said because it's an immense lunatic asylum."

If there's not much evidence of lunacy in the book, there is classic English eccentricity in the character of Mrs McCosh, mother of the four girls and inveterate letter writer and serial pest who offers advice and service to the King and gets return letters from his long-suffering secretary. She's a suffragette who wants the vote so she can back the Conservatives. (Not, it seems, that uncommon. Winston Churchill said that had he known so many women were going to vote Conservative he would never have opposed the vote for women.)

If the changing role of women brought on by the war is one significant stream in the book, so is the decline of faith. The latter is something of personal interest to de Bernieres.

"I was brought up as a devout Anglican, but then I had a reverse Damascene conversion when I was in South America and saw a young woman killed in a railway accident and I just suddenly thought, there's no God. It was just like that."

One of the book's significant figures is Captain Fairhead, the army chaplain who comforts Rosie after the death of Ashbridge and who comes to doubt his own faith but not his vocation to look after the dead and counsel the suffering.

De Bernieres has been corresponding with a rector friend about faith and they have decided that it has nothing to do with reason but everything to do with direct intuition. So does Fairhead mirror his creator's thoughts?

"He is a much nicer person than me and more thoughtful. He doesn't lose the faith as much as I have. He has the strength of vocation. What I have is the strength of vocation as a writer and to a lesser extent a musician."

De Bernieres is a classical guitarist and for many years was on the road giving concerts. That ended soon after his children were born – "it was completely incompatible with being a good father". He and his partner have separated and now share custody of their 10 and seven-year-olds. He   plays only locally near his Norfolk home despite suffering from dystonia, which can affect the hands of guitarists. "I can't really do proper concerts any more."

It is thanks to the gigantic success of Captain Corelli's Mandolin that he lives in his Georgian rectory. That book sold many millions of copies and was later given the Hollywood treatment. He appears ambivalent about the impact of the book, grateful for being able to afford the house - "I was living in a tiny flat over a junk shop in London" – but chary about other aspects.

"If you've got money, if you've got fame, it's almost impossible to know who your friends are, who you should be really trusting, what people really want. And people who really like you feel embarrassed to put themselves forward because they don't want you to think they're on the make."

Given that Captain Corelli was published more than 20 years ago, I wondered whether that was still the case?

"To some extent I was saved by Dan Brown and J.K. Rowling. They used to call me the publishing phenomenon of the '90s but I'm nothing compared with them. I feel sorry for J.K. Rowling; she must be the loneliest woman in the world. There won't be anybody she can trust not to be on the make."

But the worst thing for a single man is women: "You get women keen on you who wouldn't have even looked at you if you worked at a biscuit factory."

He was disappointed with the Corelli film but says it was worth it to meet Penelope Cruz, who played Pelagia. "She was a real sweetheart." And he was more enthusiastic about the film Red Dog, based on his book of stories about a charismatic Kelpie/cattle dog cross that roamed around parts of WA.

"It was sentimental, but it was in many ways better than the book, which is not something you can often say. It had a tremendous vivacity, was lively, funny and moving and there was nobody in it who was an improbably beautiful Hollywood star," he says. "The bad thing is that a really good film like that can't get decent distribution; it should have been a worldwide hit instead of being just an Australian hit."

Louis de Bernieres gives the opening night address at the Melbourne Writers Festival on August 20 at the Melbourne Town Hall. See mwf.com.au; He is in conversation at the Sydney Opera House on August 24. See sydneyoperahouse.com.au. The Dust Falls from Dreams is published by Harvill Secker. Buy now on Booktopia