Don’t Panic About Mortgages

After successive Bank Rate rises, the cost of a mortgage hit a 15-year high in July. In unpredictable and unsettling times, here are some ways for mortgage holders to keep a cool head.

Help is available

If you’re worried about your mortgage payments, in the first instance, seek help from your lender, to come up with a payment plan to help you get back on your feet. Repossession is a last resort; in the first three months of this year, only 750 homes and 410 buy-to-let properties were repossessed⁶. The best thing to do is communicate with us early if you are finding it hard to keep up with costs.

Careful stress tests

When we send lenders a mortgage application, they check whether your finances will be able to withstand higher interest rates. Lenders are testing applicants more stringently to make sure they would cope with interest rates of 8% or 9%.

Room for manoeuvre

In difficult economic conditions, existing borrowers are finding new ways to mitigate the higher bills. Examples include extending the term of their mortgage, which can reduce the burden now but will ultimately result in more being paid back in total. First-time buyers are seeing their plans change too. Options to navigate the rising rates include putting down a larger deposit or buying a smaller property.

Job security and protection are key

A positive economic indicator has been the jobs market, which has remained resilient throughout the past year. Lenders say the most common reasons for people falling behind on mortgage payments generally involve life-changing events such as a job loss or serious illness, highlighting the importance of protection policies such as income protection or critical illness cover.

Unpredictable rates

According to the Bank of England, one million people will see their mortgage bill rise by more than £500 a month by the end of 2026. As has always been the case, however, mortgage rates fluctuate in relation to other economic factors. For example, rates offered by many big lenders fell significantly in August after official inflation figures came in lower than expected.

And above all else…

Keep calm and call us.

⁶UK Finance, 2023

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments