Hopeful home buyers have to be creative in some instances to find a spot on the property ladder. Some are seeking help with deposits and other costs from the Bank of Mum and Dad and in many cases extending an out reached hand to other family members and friends. Some are teaming up with older family members and buying a multi-generational family friendly home to accommodate grandparents, parents, and / or a growing new family to spread the expenses and help more than the new home buyer. While there are others purchasing a home with friends, fixing it up, selling it, and taking the profit to repeat the process until all members have money to buy their own house. They share expenses in fixing up the home, as well as usual homeowner expenses which makes buying affordable and they can invest versus spend out on rent.

Other home buyers are purchasing homes that allow them to rent out a portion of the home, and at times the larger part so the greater part of the home is higher priced for income and helps them afford the mortgage. Then after a portion of the debt is paid, they remortgage to an affordable repayment and move to the bigger portion and rent the smaller part as their family grows. Some plan to stay in the smaller part and live until the mortgage is paid off and they live free of any mortgage repayment or rental cost.

Home buyers are also looking to more affordable homes that need improvements and upgrades in which some could be a DIY project, but the property is still capable of being lived in safely and properly. These types of properties tend to be much more affordable and can offer their own unique charm and history as they are renovated.

Homeowners, too, are having to be creative to make ends meet with higher borrowing costs. As homeowners are coming to the end of their current mortgage term, many will find they were paying at a much more affordable interest rate. For instance, in 2021, the Bank of England’s standard base interest rate was at an all time low of almost zero at 0.1%. It remained until December 2021 when the Monetary Policy Committee (MPC) voted to hike the rate by more than double to 0.25%. 

With the base rate being historically low, many lenders followed along and offered their own historically low mortgage and remortgage rates. In 2022, the rate was climbing with each consecutive MPC meeting, but by the end of December 2022 was still at only 3.5%. The rate grew through August 2023 and was voted to remain steady in September 2023. It was not until August 2024 that the rate was cut for the first time since March 2020 by 0.25% to take the rate from 5.25% to 5.0%.

Homeowners who secured a fixed rate mortgage when rates were lower, whether it was in 2021, 2022 or prior to the peak in August 2023 of 5.25%, losing their current borrowing rate when their term expires has them facing perhaps higher rates than they were used to paying. Luckily, in the last month lenders have outpaced the MPC and are offering rates not historically low, but at least at or below the current base rate of 5.0%. Some have reached 4.0%.

In an effort to make mortgage costs more affordable, some homeowners are being creative with their approach to homeownership much like today’s home buyers. Many are turning to creating private living spaces for long term renters and some are simply renting out rooms short term. 

According to a Barclays Consumer Spend report, one in every ten, or 12% of London homeowners have resorted to renting out a room to generate income. This trend is at 3.0% when considering the whole of homeowners across the UK.

Putting the higher cost of borrowing into perspective, a homeowner would need to extend their mortgage repayments over 70 years to be able to have the same repayment amount offered just two years ago according to Barclays.

Despite the 16-year high base rate of 5.25% being in the past, and lower rates than expected currently available, it is still a struggle for many homeowners to afford their repayments when they have had to negotiate inflation which at one time reached double digits.

Experts encourage homeowners coming to the end of their mortgage term to consider remortgaging rather than waiting for another cut or two by the MPC to trigger lenders to reduce their offers. Without a remortgage, homeowners will be transitioned to their lender’s standard variable rate which could be at or near double the rate that might be found with a remortgage. 

If a lower fixed rate is on their agenda, perhaps avoiding a SVR for a tracker rate without fees for ending their chosen term early to allow for a switch to a fixed rate later is a choice better than paying more than necessary with a SVR.

Shopping online for a remortgage is a fast and simple way to determine savings and other benefits of remortgaging versus waiting and paying too much on a SVR. Visiting the website of a remortgage broker could quickly provide numerous quotes from a variety of lenders. Brokers often have exclusive deals as well. Homeowners could also go from lender website to website to gather quotes. 

By having quotes to review and compare, a homeowner can make a smart strategy to save now and into the future rather than paying more and perhaps waiting too long for a rate cut to put an attractive deal they want in place. Rates will not mimic the days of 2020 or 2021, so rather than hoping for the impossible historic lows of before, its best to find the lows that offer savings of today.