In normal times, moving on from a fixed rate mortgage deal was literally no big deal. It was still worth shopping around, but after more than a decade of consistently low interest rates, there were plenty of good value alternatives to choose from. Now however, the picture is very different.
In December 2021, interest rates were at an historically low level of 0.1% as the Bank of England sought to offset the economic effects of the pandemic. Since then, a series of rises has brought us to the current base rate of 4.5%, with experts predicting that they may rise as high as 5.5% by the end of the year.
The surprise September mini budget in 2022 caused havoc in the mortgage market, causing rates to reach a peak of 6.6%. At the beginning of 2023, it seemed as if a brighter picture was on the horizon, but due to stubbornly high levels of inflation, mortgage lenders have once again been raising their rates and pulling deals from the market.
All this means that mortgage holders who fixed a deal before 2022 that is now coming to an end are facing the prospect of their monthly repayments doubling or even tripling. While it will be impossible to secure a cheaper deal, there are still some steps anyone in this position can take to ensure that they are still paying the most competitive rates.
If no action is taken, then borrowers are automatically moved on to their lenders’ standard variable rate (SVR) which is likely to be one of the highest rates on the market. It is possible to lock in a new rate three to six months in advance, so it’s important to check your contract and find out exactly when your current deal ends.
The next step should be to consult an experienced mortgage broker who will be able to use their inside knowledge of the markets to source suitable deals. This step is especially important if your financial circumstances have changed and you want to move to a new lender, because you will have to go through a different set of affordability checks.
This is the process lenders use to assess how much of a risk you represent to them, and it varies slightly depending on the criteria of the lender. For applicants with a good credit score and who are not earning less than they were when they first applied for a mortgage, this should not be a problem.
However, if you have had any issues with your financial situation, such as a drop in salary or missed payments on your credit card, then you may struggle to secure a new deal for the amount that you need. In this case, it is a good idea to speak to a specialist broker who will be able to advise you on your options.
It is certainly not impossible to get a mortgage deal even if you do have a poor credit history, but be prepared to pay a higher than average interest rate. This is likely to seriously impact on your monthly household budget, so you need to make sure that you are prepared.
Take a look at your accounts and see If you can cut back on any non-essential spending, or alternatively consider ways of increasing your income. This may be through asking for a pay rise, taking on extra hours at work, or taking on a second part-time job in the evenings or at weekends.
For some, the prospect of finding hundreds of extra pounds each month to pay the mortgage is daunting, or may even be downright unaffordable. However, there are still a few options to consider even if the situation seems to be bleak.
If you really think you can no longer afford to pay your mortgage, the first course of action is to speak to your lender. They are under obligation to consider any reasonable requests from customers who are experiencing difficulty meeting their payments.
In some cases, you may be able to extend your mortgage term, which means that your monthly payments will be lower. You will eventually pay more in interest, but it could still be the better option than selling up and moving back to rented accommodation. Other options may include taking a mortgage holiday while you seek to improve your financial situation.
If you are looking for a mortgage broker for defaults, please get in touch with us today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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