With homeowners across the UK feeling the effects of the cost-of-living crisis, it’s important now more than ever to make informed decisions regarding your finances. Here are all the key things you will need to consider about your mortgage while interest rates are on the rise.
How much will my mortgage increase?
The rate at which your mortgage will increase depends on whether you’re on a tracker, standard variable rate or fixed rate mortgage. If you’re on a fixed rate mortgage you will not experience any changes on your mortgage for now. But as the base rates continue to rise into 2023, it’s important for all homeowners to pay attention to their mortgages in the upcoming months.
If you’re coming to the end of your fixed rate mortgage soon and you don’t act, you will automatically be placed onto your lender’s SVR, or a revisionary rate, which could be costly, and puts you at risk of going into a “payment shock” – where your bills suddenly hike up at an unaffordable rate.
Should I remortgage now?
It’s understandable why many consumers are interested in switching their mortgage plans early due to the growing concerns on interest rates and the increasing cost of living and energy crises. Many homeowners will try to take some control of their situation by fixing their rate for a specific period.
If you’re planning ahead for another rise by acting early, it’s important to be aware that there is usually a penalty for leaving your current deal prematurely, though many would argue that the cost is worth having protection against further increases in interest rates later down the line.
I’m on SVR, should I switch over to a fixed rate?
Switching to a fixed rate is a decision that should be made based on your individual circumstances. First and foremost, you should speak to your adviser and establish any future financial implications should the predicted rate rises take place. Once you’ve gained a clear understanding of your situation, you can make an informed decision on which plan would work best for you.
An unsteady economic climate and expected base rate increases are all good reasons to start figuring out your individual needs before making any big decisions.
I could previously comfortably afford my mortgage, but pressures mean that I now can’t. What should I do?
At any given point, if you are struggling with your mortgage repayments, you should contact your lender at the earliest opportunity. Lenders are obligated to exercise forbearance and do everything in their power to help you through a financially difficult period. It often would cost more for lenders to evict a struggling homeowner rather than offer them help, so don’t be afraid to reach out.
Having a conversation about your situation will help the lender find out which solutions may be available to you. This could include things like temporarily switching your mortgage from a capital and interest rate repayment to an interest only payment for a finite period, until you’re able to afford making your regular payments again.
If you’re looking for a mortgage and need some advice on how to find the best deal, you can contact us here.
