How To Manage Mortgage Repayments As Interest Rates Spike
As interest rates continue their upward trends, we gather several tips from the industry to help homeowners and buyers manage the rising mortgage repayments.
Experts at Money.co.uk analysed the mortgage market across the country and revealed how this affects mortgage borrowers. They also shared several tips to keep mortgage repayments down.
What Are The Key Findings?
Experts say many mortgage borrowers will suffer from increasing rates. Those with fixed-rated products won’t feel the impact until the end of the fixed term. But those on variable rates (tracker, discounted deals) might have already felt the impact of increased rates as their mortgage repayments spiked.
Tracker mortgages follow the base rate from the Bank of England. In turn, discounted mortgages are based on the SVR of a chosen lender. Note that SVR is not directly linked to the base rate but is likely to be dependent on it.
Once a fixed rate deal ends, you typically transfer to your lender’s SVR. These rates are typically higher than fixed rates, meaning mortgage repayments will go up.
How To Manage Mortgage Payments And Increased Rates?
Those with fixed-rate deals might benefit from changing their product to take advantage of current rates before new interest spikes. However, it is critical to compare the costs of remortgaging (early repayment charges) with the potential savings.
Most mortgage deals in the UK a valid for 6 months. If your mortgage deal expires in a few months, you could remortgage early. It allows you to secure a favourable rate and switch to a new mortgage when your current product expires, avoiding early repayment charges.
Credit rank, income, LTV, affordability, and overall financial state are critical factors when borrowers remortgage. If your financial situation changed from the time when you got a mortgage, you might find it challenging to remortgage.
However, there are a few steps to ensure you get a favourable remortgage. Keeping a decent credit score, reducing the LTV, and seeking help from mortgage brokers are some of the handy and viable steps to take.