what are the options if I can’t pay my mortgage due to the rising interest rates?

26 Oct 2022

what are the options if I can’t pay my mortgage due to the rising interest rates?

 

For those of you who made the decision to take out a fixed term mortgage last year, you might be having less sleepless nights, than others who decided to switch to a variable rate, or are even due to remortgage soon.

 

Over the past few months, we’ve seen interest rates soar to the highest we’ve seen since December 2008 and we’re seeing changes to the market each day. To put it in to perspective, last year a typical 2-year fixed mortgage had an average interest rate of 2.34%, has now pretty much doubled, and it looks as though the rates are still expected to rise. 

 

See how the Bank of England’s Bank Rate changed over time:

 

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

 

As the cost of borrowing continues to increase, it becomes more expensive for lenders to manage the risk they take when offering mortgages, and as a result they increase the cost to you as the borrower. Since the latest updates, we’ve even started to see more and more lenders pulling products from the market. 

 

We cannot stress enough how important it is, to keep up with your mortgage payments at their current level, as just one single missed payment, could mean it can become extremely challenging to get a mortgage deal in the future. 

 

But if you are struggling to pay your mortgage, there are certain options out there to consider… 

 

  1. Extending your mortgage term

There is always the option to extend your mortgage term, and spread the payments over a longer period of time. This will help to reduce your monthly payments, but does tend to mean higher interest payments in the long run. 

 

 

  1. Take a mortgage payment holiday

 

A mortgage payment holiday, is an option to help you to reduce your monthly payments, or perhaps even stop them altogether. Lenders were required to offer this as an option during the pandemic, to those that were really struggling to continue with their payments. After all, lenders would much prefer to receive a lower payment each month, than potentially payments stopping altogether. Please be aware that your lender may capitalise the deferred payments, resulting in a longer term level of debt.

 

 

  1. Switch to an interest only mortgage 

 

Although we would advise this as a temporary choice, you may be able to switch from a capital and interest mortgage to an interest-only option. This means putting your mortgage payments on hold, but instead just pay the interest to allow for some breathing space. These are subject to your lender’s discretion and some lenders will expect you to evidence that you have sufficient capital to repay the debt at the end of your term.

 

Act now: there’s no better time to speak to our experts! 

 

 

Many of these options, all depend on each individual personal circumstances, so leaning on expert advice is key!  We can’t control the rapid interest rises, but what we can do is offer a warm welcome, a cup of coffee, and some professional, open and honest advice. 

 

Our team of experts, will sit down with you to discuss your outgoings, and listen to your budget requirements, and with their profound knowledge of the industry, they will be able to come up with a bespoke plan to suit you. 

 

 

We’re here, ready and waiting to offer you a helping hand.

 

Should you encounter difficulties in making your monthly payments, please contact your mortgage provider straight away, to explore possible solutions available to you.

 

Your home may be repossessed if you do not keep up with your mortgage payments

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