5 ways to deal with rising mortgage costs
The first interest rate cut in four years might ease some financial pressure. But a new report shows rising mortgage costs may hit millions of households.
According the Bank of England, mortgage payments are likely to rise for three million households by 2026.
The Bank’s report states, “The share of households spending a high proportion of their income on mortgage payments is still expected to increase slightly over the next two years.”
It is predicted by the end of 2026, 30% of mortgage holders will be subject to at least a £100 increase in monthly payments. A typical household will see their repayments go up by 28% to £180 per month. But around 400,000 borrowers could have an increase of 50% or more.
While this is concerning, the Bank adds, “UK households and businesses have remained resilient to the impact of higher interest rates. Also, it is forecast that the number of mortgage holders who cannot meet their payments will remain below the figure seen following the 2008 financial crisis.”
If you’re worried about affording your mortgage, there are steps you can take to ease your concerns. Here are 5 tips to help.
Tips to help deal with rising mortgage costs
Don’t panic!
Our first tip is not to panic. You should speak to your mortgage broker if you believe you are going to be facing an increase in your mortgage payments. If you don’t use a mortgage broker, such as The Mortgage Dog, then it’s worth finding one. We can help by looking at your finances and giving you the best advice. If you arranged your own mortgage and prefer speaking to your lender, then arrange to ask them about what options are available.
Consider overpayments
If you can save some money, then consider reducing monthly repayments by making an overpayment on your mortgage. Make sure you’re aware of any minimum or maximum overpayments that are allowed by your mortgage deal. Even a modest amount could have an impact on your monthly repayments.
Check when your deal comes to an end
If nearing the end of your current deal, find out what you might pay if your mortgage moves to the lender’s standard variable rate. This will help you decide whether it’s worth looking at a new fixed-rate mortgage or even a tracker rate product. If you use a broker, you will usually receive notice before your deal ends. But whether you do or deal directly with your lender, being proactive and getting the facts now could mean saving you money.
Extend the loan term
Extending your loan term can help lower your monthly payments, which makes them more affordable. But it does mean you’ll be paying off your loan for a longer period. And you’ll be paying more interest in the long run. Like most financial advice, a lot depends on your personal circumstances. So make sure you have all the facts before making your decision.
Make savings
If you are worried about the rising cost of mortgage payments, you could make savings elsewhere. If there are subscriptions or other monthly outgoings for services you are no longer using, then that extra cash could help you meet higher mortgage costs. One way of reducing costs is to even consider reducing the size of your mortgage by moving to a property that costs less. It may seem drastic, but if you can find a new home that costs less, it also means you have less to worry about.
No matter what you decide to do, we advise you get help from a broker as they can help you understand your finances. They also have access to deals that are not available from high street lenders, which might make your mortgage more affordable. You can speak to our experienced team of advisers today.
Your home may be repossessed if you do not keep up repayments on your mortgage
