Given the rise in mortgage interest rate pricing, many households face significant increases in their monthly mortgage payments. What support is available for homeowners, and how can you navigate rising interest rates?
As a homeowner, it’s understandable if you’re growing increasingly concerned about how much your monthly payments could increase with your next remortgage. According to the Bank of England’s latest Financial Stability Report, the average household remortgaging in the second half of 2023 could expect to pay around £220 more on their monthly repayments at current rate pricing*.
Additionally, the Market Financial Solutions’ survey of 2,000 adults revealed that 50% of borrowers who applied for a mortgage in the last year had their product withdrawn by the lender before they could secure it due to ongoing market volatility. Not only is this additional stress, it often means significant price increases and uncertainty.
So, what support is available to you, and how can you navigate rising interest rates in an ever-changing mortgage market?
Secure your rate before it’s pulled
It’s vital to have your updated documents ready when starting your mortgage application. This will help your broker progress the case more quickly and should improve your chances of securing your desired mortgage rate before it’s pulled.
You can speak to your broker to find out exactly what documents your lender will ask for, but as a rough idea, it’s good to have the following up to date and on hand:
- If you’re employed: Last three months’ payslips
- If you’re self-employed: Last two years’ SA302s/Tax calculations and supporting Tax year overviews, and last two years’ full company accounts
- Last three months’ bank statements
- A valid form of ID (This can either be a driving licence or a passport)
Explore your product transfer options
A product transfer can be a great alternative to a standard remortgage. With a product transfer, you stay with your existing lender, meaning less paperwork for you to complete and often allows you a much quicker, stress-free process, amongst many other benefits.
It’s worth asking a whole-of-market mortgage broker to explore whether a product transfer is the most cost-effective option for you. Remember that you may be unable to access the most competitive deals with a product transfer, as your lender can only offer their pricing. Again, speak to an expert broker who can explore and compare all the rates you can access.
The Government’s New Mortgage Charter
In June, the Government launched the Mortgage Charter to support homeowners struggling with their mortgage repayments. The Charter has plenty of benefits, such as tailored support from lenders for anyone under financial stress and protecting homeowners from being forced to leave their homes in less than a year from their first missed mortgage payment. The Charter came into effect on the 30th of June.
Making overpayments on your mortgage
If you still have some time left on your current rate, consider making overpayments on your mortgage. Currently, your existing mortgage rate will likely be cheaper than the new rate you fix onto. As such, by paying off more capital now, you could save yourself a substantial amount on your monthly repayments when you remortgage. You’ll need to check that your existing mortgage allows for overpayments by asking your lender or checking your original mortgage illustration or agreement.
Discuss your options with your lender
It’s always worth having an honest conversation with your lender to see what support they can offer you. It’s common to want to avoid these difficult conversations, but lenders have a duty of care to their customers and genuinely want to support anyone struggling to afford their mortgage.
For example, they may offer to extend the term of your mortgage. By extending a 25-year mortgage to 30 years, for example, you reduce your monthly repayments in the short term. This can be a really beneficial option to those struggling with the increase in their monthly outgoings. However, it will increase how much interest you pay over the mortgage term, so it’s worth bearing that in mind before going down this route.
Alternatively, some lenders can offer to switch you to an interest-only payment plan for a set period, reducing your monthly mortgage repayments. There are some drawbacks to this type of option, such as a sharp rise in your mortgage payments once this period ends, so it’s worth discussing your plans with a broker before making any decisions.
Speak to an expert mortgage broker
For peace of mind that you choose the most suitable financial option, we highly recommend speaking to an expert broker for your next mortgage application. A whole-of-market mortgage broker will conduct a full market search to see what rates you could access and discuss your options. In doing so, you can take confidence in knowing you’ve secured the best rate for your circumstances.
Your broker can also offer you invaluable advice and support in the application process. We understand that dealing with your remortgage right now may be incredibly stressful when faced with the increased costs, and our experts are here to help. Our brokers can discuss the full application and your property finance options to help support you with your home mortgage needs.
To see how we can help, call us on 0345 345 6788, or submit an enquiry to one of our residential mortgage brokers here.
*Rates as at July 2023
16th August 2023