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11 How to manage and afford rising mortgage costs With the bank base rate at its highest for 15 years, Sarah Thompson, Managing Director, Mortgage Scout, looks at the steps you can take to protect yourself and your home against mortgage repayment rises. If you still have a little while to go before you have to re-mortgage, you might be tempted to hold off until the last minute to find out how much extra you might have to pay. However, one of the best ways of managing your mortgage increase is to identify the additional payments as soon as possible so you can make a plan. And because you can ‘lock in’ rates up to six months in advance, acting sooner rather than later may be the best move. 3 top tips to help manage any rise in mortgage payments: 1: Speak to a broker or your lender at least six months in advance – you can lock in deals early with some lenders. In the past, contacting a lender or broker up to three months before you were due to remortgage would generally be enough time to get a deal in place. However, it’s now well worth contacting them six months before your current mortgage expires, as you can lock in a deal that far in advance. With rumours that rates could rise further this year (5.25% as of Aug 2023), this could potentially allow you to fix at a lower rate than would be available six months from now. And because mortgage deals are going very quickly – with some being pulled by lenders at a few hour’s notice – it’s worth acting quickly, as good mortgage rates you can access now might not even be available in a few weeks or days. 2: Speak to both your lender and a broker We are finding that, in some cases, lenders offer deals to existing customers that may not be available if you switch to a new mortgage or are looking to come off the Standard Variable Rate (which tends to be the highest rate charged by a lender). However, regardless of how good the deal your current lender offers seems to be, it’s well worth speaking to a broker that can check all the mortgage products available to you, as there may be an even better option out there for you. 3: Ask what help your lender can give you if you are struggling with the new rates Currently, the base rate is 5.25%, with some predicting it could go up as high as 6% or more (Schroders). So, if you are on a Standard Variable Rate or Tracker and are already struggling to pay the rising mortgage costs, do contact your lender or broker right away. If you’re worried about the possibility of losing your home – and there has been a lot in the media about repossessions rising - rest assured that this is the last thing your lender wants to do. Most lenders have already committed to not taking any action to repossess your property for 12 months, so at the very least, you are likely to have some breathing space to get your finances in order. Lenders can also do a number of things to help reduce the amount you have to pay each month: Move you from repayment to interest only This will cost you more in the long run in interest accrued on the outstanding loan, but if you have a £200k mortgage with 20 years left, your monthly payments could reduce by c£450 per month by moving to an interest-only mortgage. And if you only do this for six months, it won’t affect your credit rating. Extend your loan term In the past, 25 years was the standard time period over which a mortgage would be paid back. However, we are all living a lot longer and expected to work for longer, too, so if it helped to bring down your mortgage costs until rates come down – which they are forecast to do in 18 to 24 months – extending your loan term could help you through this tricky time. As an example, if you have a £150,000 mortgage at a 6% mortgage rate, extending the term from 25 to 35 years will reduce your monthly payments from £966 to £855, a saving of £111 a month. (using BBC calculator) However, these calculations are very individual to each person, so do ask for figures for your own mortgage from your lender and/or a broker. Mortgage payment holidays If necessary, just like during the pandemic, you may be able to take a ‘holiday’ and stop paying your mortgage altogether for a number of months. This will depend on your lender and you will also need a plan to pay Trinity Close Sudbrook £1,150 pcm Immaculate furnished two double bedroom modern house with stunning views in a village location. Ideal for a professional couple or small family. Chepstow Office 01291 626775 Hollybush Caerphilly Stunning barn conversion that has been completed to a very high standard in a truly rural location yet just 25 minutes from Cardiff. 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