Know Your Options: Dealing With Higher Mortgage Rates in a Chaotic Environment
Key Highlights :
The Bank of England's decision to raise interest rates to five per cent – the highest rate since 2008 – has left millions of people in a difficult position. With mortgages set to hit record levels shortly, it's no surprise that many people are worried about how they will manage the higher payments. In this article, we'll look at some of the options available to people who are struggling to pay their mortgages in the current chaotic environment.
The first thing to do is to speak to your lender and explain your financial situation. You may qualify for a mortgage payment holiday, which is a short period where you are given a break from your regular payments. Alternatively, the mortgage firm might agree to just allow you to stop payments while you get back on your feet. It's important to ask if this will impact your credit score though.
If you have some savings, an off-set mortgage might be a good option. This involves linking your savings with your mortgage to reduce your interest, and can be a great way to reduce your payments.
Interest-only mortgages are another option. With this type of mortgage, you only pay the interest on the mortgage but not the cost of the property itself. However, you must have an alternative way of paying off the debt in the long-term.
Extending the term of your mortgage may also be an option with some lenders. Your payments will reduce, but the amount of interest you pay will ultimately be higher.
If you are in arrears, your lender may consider the option of ‘capitalising the arrears’. This is where they agree to add your arrears to the amount you owe on your mortgage. Alternatively, you can always consider downsizing – selling your property and moving to a cheaper one.
Finally, there are always other options such as taking in lodgers or students to help pay the bills, or hiring out your property to film and television studios or advertising companies.
It's important to take realistic, professional advice and understand all the options and implications before making any decisions. There are organisations such as Citizens Advice and Shelter who can provide useful guidance, and it may be worth speaking to a mortgage broker or financial adviser too.
Dealing with higher mortgage rates in a chaotic environment can be a daunting prospect, but it's important to know your options and take the necessary steps to ensure you can manage your payments.
