Homeowners Consider Downsizing As Interest Rates Rise Again

May 12, 2023

The Bank of England (BoE) has raised interest rates for the 12th consecutive time in a row, from 4.25% to 4.5%. This is the highest level for almost 15 years when the economy was in the grip of the 2008/9 credit crunch. The Governor of the BoE, Andrew Bailey, did not rule out the possibility of further interest rate rises to 5% later this year.

The quick succession of the rises has had a significant impact on the monthly mortgage repayments of those on tracker and standard variable rate (SVR) mortgages. According to The Guardian, the average household with a tracker mortgage have seen their payments rise by a third in under a year, leaving them £3,000 less well off a year.

Those mortgage holders with fixed rate deals that are coming to an end will also face a painful hike in their monthly payments. Most deals are around the 4.45% mark, compared to around 2.5% just 15 months ago. 

For those with a bad credit score, obtaining a good mortgage deal may be even more challenging. However, it is not impossible, especially with the help of an experienced mortgage broker who has established relationships with lenders who specialise in non-standard cases.

It is more likely that you will have to pay higher than average mortgage rates and put down more deposit if your credit history is below average, but with rents reaching record levels in many areas of the country, this may still represent the best value for money for some people, whether they are seeking to re-mortgage or buy a home for the first time. 

According to the consumer group Which?, about 700,000 UK households defaulted or missed a mortgage or rent payment in the last month. Anyone who is struggling with repayments is advised to contact their lender as soon as possible rather than slide into a default, which will stay on your credit record for six years. 

For some homeowners, their only option is to downsize to a smaller property with a more affordable mortgage, or even to move abroad where average house prices are lower.

Asked to comment on the latest rate hike the Chancellor Jeremy Hunt said: “The Bank of England is predicting that we will hit the inflation target. But there has never been anything automatic about hitting it. That is why it is so important, if we’re going to bring certainty back to family finance, stop prices rising, that we stick to our plan to halve it.”

“We are very conscious that all inflation is difficult, and particularly for those least well off. This inflation is particularly difficult for those least well off because it is concentrated in what are called the essentials of life, food and energy, and people on lower incomes have a larger proportion of their consumption in the essentials of life.”

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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