Around 1.6 million UK homeowners with a fixed rate will see their deal end by December 2024, facing much higher costs. There are also 1.4 million people on tracker and variable rate mortgages who are likely to see an immediate increase in their monthly payments from yet another interest rate rise.
It is a worrying time, especially for those who may be struggling to make higher payments on their mortgage, there are however, plenty of ways to help keep mortgage payments down and ways to help in these uncertain times.
Types of Mortgages and How They’ve Been Affected.
Fixed Rate Mortgage.The most popular mortgage type is usually set for around 2 or 5 years, after which borrowers will remortgage or automatically be moved to the lender’s SVR (Standard Variable Rate). Around 1.6 million homeowners will come to the end of a fixed deal this year and face a much higher monthly cost when it comes to renewing.
Standard Variable Rate (SVR) Mortgage.These rates change at the lender's discretion, which is influenced but not directly linked to the Bank of England base rate. Borrowers on an SVR mortgage will find they are paying much more than they were a year ago.
Tracker Mortgage.These mortgage rates rise and fall in line with the Bank of England base rate, which is set 8 times a year. If the BoE rate rises, so do your mortgage payments, and vice versa. Around 1.6 million people are on tracker mortgages and again, are paying much more than they were 12 months ago.
How Can I Keep My Mortgage Payments as Low as Possible?
It is understandably a worrying time for most homeowners right now, however, there are ways to help keep mortgage payments down when it comes to signing up for the next fixed-rate deal.
Use Savings.If you are fortunate enough to have money saved, then you could use some of it to pay down the total amount borrowed. Savings could also be put into a linked offset savings account, which is an account where you only pay interest on the mortgage amount, minus the amount you have saved.
Extend Your Mortgage.Extending your mortgage term could bring down the monthly cost which can provide some relief, however, it’s important to remember this means you would be paying more in total and for a longer period.
Take a Mortgage Holiday.This enables customers to delay their payments for a period. Some lenders may offer this option but not all and it is dependent on the circumstances of the individual. It is also important to note that this would show on your credit file and possibly affect future attempts at borrowing.
What Will Happen If I Can’t Make a Payment?
It is important to note here that your lender must make reasonable attempts to reach an agreement with you if you are unable to make a payment, the FCA (Financial Conduct Authority) which regulates mortgage lenders states that all lenders must treat their customers fairly.
If you are aware that you may miss a payment, or are struggling financially, then borrowers must contact their lender as soon as possible. A shortfall equivalent of 2 or more months means that you are officially in arrears, so the quicker you act when signs of struggle hit, the better.
What Steps Would My Lender Take If I Fall into Arrears?
Your lender must treat you fairly, considering your requests in changing how you pay. A fair lender may also suggest or allow you to lower your repayments for a short period, extend the term of your mortgage or just pay interest for a period.
Within 15 days of falling into arrears, your lender must:
- Clearly communicate how much your arrears add up to.
- List all specific payments you have missed.
- Explain to you how much is outstanding on your mortgage.
- Clearly outline any changes.
In extreme circumstances, it is possible that homes can be repossessed, although very rare and there are many stages a lender must go through before taking such action. A home repossession process would take around 2 years.
Will The Government Offer Any Kind of Help?
Due to fears of driving the cost-of-living crises even higher, Chancellor Jeremy Hunt has ruled out introducing major financial aid for mortgage payments. Support for mortgage interest is available for those on qualifying benefits, where the government pays some of your mortgage interest payments in the form of a loan, which will have its own interest rate and borrowers tend to pay off the loan when they sell the property, or ultimately when they die. In more serious cases, like the risk of homelessness, devolved governments run some mortgage support schemes.
What Does the Future Hold for UK Mortgage Rates?
Borrowers have seen considerable upheaval over the past year, after many years of low rates, no one could have predicted a rise of this degree, so to predict what will happen in the future is difficult.
After the 2022 September mini-budget, fixed-rate interest rates slowed but have risen again due to how fast wages and prices appear to be rising and for longer than expected. Due to this, the Bank of England could continue to increase the base rate, from its current 5% up to 6%.
If this was to happen, those on tracker mortgages will face immediate higher repayments, and possibly those on SVR mortgages.
TaylorMade: A Mortgage Broker That Will Do its Best for You.
One thing is for certain, we here at TaylorMade, Manchester’s leading mortgage broker, will do our utmost to ensure we provide the advice and support you need to get through this turbulent time.
We are a mortgage broker who strives to understand and do the very best for our customers, finding the best rates on the market today and providing advice and knowledge designed for your individual circumstances.
Never before has a mortgage advisor been more important, so if you’re concerned about rising mortgage rates and require professional, independent advice to find your next mortgage deal, contact our friendly and helpful team today.
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