Thousands of mortgage holders who secured cheap deals during the pandemic housing boom will be facing steep increases in their repayments over the next few months as their deal comes to an end. For some, this will inevitably mean having to make stringent cutbacks to the household budget.
The Independent reports that some people signed up for deals with an interest rate as low as 0.99% in 2021, and now face the prospect of rates over 4.5%. This would add £364 a month to the average mortgage. The publication spoke to someone who is facing a tripling of their housing costs in September.
Michelle Bell from Sussex lives in a shared ownership flat, and will have to find an extra £200 a month for joint mortgage and rent, which has prompted her to move to a cheaper area to live several miles away from her original home.
She said: “I will have to tighten my belt and think about things like food bills, and also cut down on going out. If a friend rings on a Saturday, and says ‘let’s go for lunch’ I’m thinking maybe I can’t – especially as I now live further away.”
She added: “The extra cost also meant I’m not putting as much down on the house as I could do, as I need to keep a savings pot for those emergency situations. Things like if the car needs a service or there’s an expected cost you can’t plan for.”
Anyone who is worried about their ability to afford a new mortgage deal is advised to start looking early, because it is possible to lock in a deal six months in advance. This will offer some protection from further turbulence that is expected as the Bank of England battles to curb inflation, which fell by less than predicted to 8.7% in April.
It may be tempting to cut out the services of a mortgage broker to avoid any extra costs, but this can be a false economy. An experienced broker will have access to a far wider range of deals than you could source alone, and will have the expertise and market knowledge to guide you towards the best products to suit your circumstances.
There may be a small benefit to the increasing mortgage rates for first time buyers, as house prices have fallen by 1% compared with this time last year, according to the latest data from Halifax. The BBC reports that this represents the first annual fall for 11 years, with the average house now £3,000 cheaper than one year ago.
For those with enough deposit saved, it may be a good time to secure a mortgage deal before the predicted further rise in interest rates takes place. The spiralling monthly rents in some areas of the UK will mean that in many cases, a first time buyer will still be making lower equivalent repayments on their mortgage.
If you are looking for an adverse credit mortgage broker in the UK, please get in touch today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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