It is fair to say that mortgages haven't been spoken about as much as they are right now since the dark days of the ‘credit crunch’. With interest rates slowly rising throughout 2022 and then the sudden huge increases overnight after the disaster of what we now call the ‘mini budget’, naturally most people's biggest financial commitment is being talked about more and more.
We have had years of record low interest rates with some lenders offering fixed rates under 1% only back in late 2021. Fast forward to today you'll find that typically the best interest rates start with a 4. This is obviously heavily affecting many people's monthly payment when they have gone to take out a new mortgage or additional borrowing. Despite this, we have had a very busy year so far with a lot of people looking to move or buy a property for the first time. In fact, our strongest area’s have been new build properties and first time buyers which were the 2 area’s which some people thought would struggle.
There is still plenty of confidence in the property market and ultimately, people will still move home if they want to.
So what can you do about it?
One way to offset a rise in monthly payment is looking to increase your mortgage term. Now on paper that might not always seem the best advice however the vast majority of mortgage lenders will allow you to overpay 10% of your outstanding mortgage balance per calendar year without penalty. A suggestion we have made to some of our clients is that they increase their term so they then have a cheaper monthly payment however they can then set up a standing order to pay X amount extra per month.
This then in theory brings their mortgage term back down however they have the safety net of knowing that if the monthly payment becomes a little bit too much, they can simply cancel the standing order and then just have the agreed contracted monthly payment to pay. This gives someone flexibility if needed.
There has been a real shift with mortgage lenders increasing their mortgage terms and there are many mortgage lenders now offering 40 year terms with a lot of these offering mortgages (using earned income) up until the age of 75.
You can always look to reduce your mortgage term again in the future additionally, for example if interest rates were to fall or you have more disposable income.We have also seen a rise in people looking to restructure their personal debts by borrowing money out of their property to repay these. The main aim for most is to reduce their household expenditure and utilising equity within their property to repay debts help them do this. However this is not always advisable as you are taking an unsecured debt and securing it on your property. You are also often spreading the cost of this debt over a much longer term than what you may have on your unsecured debt.
Whenever you are considering debt consolidating, in my opinion advice from mortgage adviser should always be sought.The final thing we have seen more people doing is looking at their day-to-day expenditure. Without sounding like a broken record, it really is worth looking at what you spend on a monthly basis. The biggest feedback we've had from clients is rather than just focusing on their larger bills (I know of some people who only look at their energy bill and nothing else), looking at the small ones but maybe looking to change several of them has made quite a big difference.
A recent example of this were clients of ours who were paying for 3 Amazon prime subscriptions when there was only 2 of them in the property using just the one account.Running a ‘whole of market’ mortgage brokers, we can access pretty much every lender in the UK. Despite being in my 12th year of advising, it still surprises me what a stark difference there is between lenders and the policies that they offer. The best advice I could give to anyone who has concerns about their mortgage payment is get in touch with either ourselves or another mortgage broker to discuss your options. There can genuinely be a lot of options available.
Likewise if I had a pound every time I heard from someone say something which was either not relevant anymore or incorrect about mortgages, I’d be a very wealthy man. Just because one lender does something one way or you have heard that this is the only option, it's certainly worth asking the question to a qualified advisor or estate agent to see what options you may have.