What to do if you’re worried about making your mortgage payments

Adrian Anderson - Anderson Harris

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Published: 3rd February 2023

This Article was Written by: Adrian Anderson

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The Bank of England base rate climbing to 4% puts more pressure on homeowners paying a variable rate mortgage.

It will also cause concern to those who have an existing fixed rate deal ending soon. With the UK gripped by an unprecedented cost-of-living crisis and homeowners facing rising costs on multiple fronts, the Anderson Harris team share their advice.

Around 75% of mortgage-owners in the UK have a fixed-rate product, with circa 1.8m of mortgage owners facing a fixed rate due for renewal in 2023. At the time of writing, the base rate is now 4.00%. Analysts are suggesting it is near its peak, but there may be further rises soon before the rate begins to reduce.

It means those renewing their mortgages arrangements will most likely face higher payments. Those with products set to renew are also likely to find lenders’ affordability calculators tougher to when they took out their previous mortgage. This is because the latest higher-rate household bills are all factored into lenders’ current assessments, as well as higher interest rate stress testing.

Fixed-rate mortgage renewals

If you have a fixed-rate mortgage term ending this year, get in touch now with your independent mortgage advisor. It is a very uncertain time for borrowers as fixed mortgage rates have been reducing for the last 3 months at the same time the Bank of England base rate has been increasing.

If you have the funds available and are paying a cheaper rate now, it’s an idea to consider overpaying into your mortgage. This will reduce the pot to which interest is applied. In many cases policyholders can pay up to 10% a year without incurring early repayment penalties in their mortgage during the fixed rate period. This may also help your loan to value when you come to renew.

Do however check the early repayment clauses of your policy and speak with a specialist to get advice specific to your circumstances.

An appetite to help

While the cost-of-living situation is grave, in our experience, mortgage lenders want to treat customers fairly and don’t want to launch a tsunami of repossessions.

Each person’s situation is of course different, and banks are reviewing accounts on a case-by-case basis. It’s important though to get into conversation with your mortgage broker or lender at the earliest opportunity to find an affordable solution.

Talking to your mortgage lender… what options are available

Mortgage lenders have an appetite to help if customers alert them in plenty of time to any problems. We are seeing the following approaches being considered by lenders to help their customers if they are having significant issues making their mortgage payments and/or they’re in financial difficulty:

  • Increasing the capital repayment mortgage term to enable payments to stay at a lower rate. However, if you keep the mortgage in place for a longer period of time, you will end up paying more interest.
  • Permitting a payment holiday to help you through this difficult time.
  • Switching the mortgage in the short-term to an interest only one.

If you are in any doubt about your ability to pay your mortgage, get in touch with your lender or mortgage broker as soon as possible. In these difficult times, it’s important not to bury your head in the sand or leave finding a solution till the last minute.

Lenders won’t penalise you for having the affordability conversation. These are unprecedented times, and they recognise people will struggle. It’s important for you and your lender to have clarity over your financial situation so you can both find a solution which will work for you and your family.

To help you going forward, follow these 3 steps:

  1. Be clear about your current income and outgoings
  2. Assess how much the above may change in the short term
  3. Discuss alternative options with your mortgage provider

Can we help?

Talking to an independent mortgage specialist can also help you take the informed decisions you need. Contact our team of specialists on tel 020 7495 6633 or email enquiries@andersonharris.co.uk.

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