Helping to keep your home
Worried about keeping up with mortgage payments? Here’s what experts say you should consider.
If you’re a homeowner, chances are your biggest monthly outgoing is your mortgage – and new research suggests a significant number are worried about being able to afford making their payments, as the cost of living rises.
Although many homeowners are on fixed-rate mortgage deals, giving them certainty over their regular payments, pressure may also be coming from elsewhere, as other household bills – such as food and fuel – increase.
In fact, if everyday prices continue to rise, over half (52%) of UK homeowners surveyed by Opinium believe they may struggle to afford their mortgage.
Over a third (36%) would consider paying to exit their mortgage deal early, with the average homeowner prepared to fork out £2,310 to do so, if it meant fixing into a better rate for longer. Two in five (38%) say they’ll need to cut back elsewhere to be able to keep up payments.
Across the UK, 1.3 million customers are set to reach the end of their fixed-rate deals this year and, unless they re-mortgage, will move on to a standard variable rate (SVR), according to trade association UK Finance – and some may well find the new rate more expensive than the previous deal.
Re-mortgaging may be a prudent decision for some, as average SVRs have recently increased to a 13-year high, according to Moneyfacts. co.uk. The average SVR in June was 4.91% – the highest Moneyfacts has recorded since 2009.
Even if they do take out a new deal, UK Finance estimates homeowners coming off fixed-rate mortgages this year and shifting to a new product can typically expect to see their disposable incomes shrink by 7% – due to both the rising rates and the increase in the cost of living.
“When customers are maturing on their two-year fixes and their five-year fixes now, the vast majority of customers will pay more money on their new rate,” says Graham Sellar of mortgages at Santander UK.
But homeowners remortgaging may find they have some wriggle room – Graham adds: “You can do things to change the amount of money per month you have to pay. If the customer wants to maintain their payments at the same level, they could re-mortgage and extend their term and then keep the monthly amount the same.”
Those who’ve managed to hold onto savings built up during lockdown may want to make some overpayments to their mortgage, to reduce the balance and perhaps keep monthly payments down.
Equally, people considering a fixed-rate mortgage should also consider the length of time they want to fix in for, Graham adds: “If you are worried about even more increases coming then you can lock in for a period of time. It’s about making sure you do the right thing for you.”
There are also steps homeowners can take to get themselves in a good position before their existing mortgage matures.
“The first thing they should do is find out the date the rate matures,” says Graham.
Many lenders will allow people to apply for a new rate several months in advance – meaning they would not need to break out of their existing deal in order to secure a new one. Some borrowers may be able to secure a new rate now, even if their current mortgage deal doesn’t mature until much later this year.
Completion times can vary, but some people may find they can lock into a new rate around four to six months beforehand.
For those who are worried about making their mortgage payments, speaking to your lender is key.
“The worst thing you can do is not to speak to your lender. If you’re having trouble,” says Graham.
“If customers are speaking to us, we can look for ways to amend their payments and change things (maybe extend the mortgage term or use some capital to pay the mortgage off). Don’t ignore problems. Lenders are there to help keep you in your home.”