As feared, there are homeowners and landlords struggling with their mortgage repayments due to higher interest rates. According to a report, the mortgage holders in arrears have doubled in a year. Homeowners falling behind on repayments have also increased. A sharper look into the data reveals that landlords are struggling more than most. It is thought that those that are had increased their portfolios significantly when borrowing was cheaper, or they are new landlords taking advantage of the opportunity of cheap borrowing when it existed. For those homeowners and landlords struggling, new borrowers or not, the first step to the best strategy to surviving the current economic landscape is an easy one.

The Bank of England’s Monetary Policy Committee (MPC) began fighting against the current inflation struggle in December 2021. At that time, the inflation rate was less than it is now, but would climb later into double digits, which caused the need for the MPC to keep raising the standard base rate. In December 2021, it was at 0.1%, the closest to zero it had ever been. The historic low rate would end that month with an increase in the base rate to 0.25%.

Looking back, it more than doubled the rate, but was much cheaper than the rate is now. The December 2021 rate hike was the first of what would be fourteen consecutive meetings with rate increases. The long streak ended in September of this year when the MPC voted to keep the rate steady at 5.25%. The next meeting, held earlier this month, resulted in another stay of the rate. 

However, inflation has remained steady, and is more than three times the target rate set by the Bank of 2.0%. It was reported in September at 6.7%, but the MPC is content to have the rate out of double digits which it was in January 2023.

Inflation is seen as a stubborn enemy to the UK economy, and while the journey to taming inflation could be long and difficult, the MPC is determined to react if needed against any increase and are hopeful that the current rate could be the peak rate.

Unfortunately for those that have been in possession of a mortgage that was secured before December 2021, the new lender rates were likely shocking. However, the same could be said for those that secured a mortgage at the start of 2022, for by June 2022 the base rate was only 1.25%. Therefore, there are likely many homeowners and landlords nearing the end of their two-year fixed rate deal. They will be leaving a rate secured and fixed when the base rate was 1.25% or lower and facing current lender rates with the Bank’s base rate at 5.25%.

The economy is uncertain now, especially with the war in the Ukraine and the unrest in Gaza. Inflation continues to take a toll on household budgets, and those are budgets that were trying to recover from the impact of a global pandemic. 

There is no expectation of returning to the lender rates offered in 2021 or 2022. The base rate is 5.25% and any loan from a lender will be above that level. The difference in cost for borrowers is significant and for some it will become a matter of affordability.

There is no time to waste. A strategy must be put into place and all options investigated and reviewed. How can I save money? How can I afford my mortgage repayments? 

The questions are many, and for certain, the answers to a few questions homeowners and landlords may have are these: There will not likely be a cut in the standard base rate since inflation remains three times higher than the target rate and no, the rates will not near the level seen in 2021 or 2022 in 2024. Borrowing is more expensive, and it is likely going to remain that way throughout next year.

Experts suggest for any mortgage holder to shop for a remortgage. Knowing what offers are available will be important information to have when creating a financial mortgage centered strategy. 

While there are not rates below the base rate to be found that resemble the fixed rate offers of years ago, there are options to help save money. Avoiding a SVR would be a priority and securing a fixed rate deal could save even more should rates increase again.

When a mortgage holder comes to the end of their term and they do not remortgage, they are moved to the lender’s standard variable rate or SVR. Currently there are SVRs that are at more than 8.0% while there are remortgage deals to be found much lower. So, avoiding being moved to the SVR is a good start for someone wanting to save money or if already on a SVR moving away from it would be financially helpful.  Also, a fixed rate choice, only available with a remortgage and not a SVR, would offer peace of mind against any further rate hikes.

The top advice from experts for all mortgage holders is to shop for a remortgage.

Shopping online for a remortgage is quick and simple. Visiting the website of a remortgage broker could put remortgage quotes from a variety of remortgage lenders into the hand of the homeowner or landlord in a matter of minutes. Brokers are also known to have exclusive deals from lenders not offered directly to borrowers, so visiting a broker site for quotes could prove to be most helpful. Borrowers also have the option of going from one lender site to another to gather quotes. No matter how the quotes are obtained, a variety of them quickly, or one by one, having them in hand to review and compare is an important first step in making a decision on how to prepare, to avoid or move off a SVR, or simply to know what benefits to remortgaging are currently available.

Those that have few options, perhaps due to being behind on repayments, or having fallen into negative equity (the property value is less than the debt of their mortgage) should contact their lender as soon as possible and see what opportunities they have to help those in immediate need. 

The fact that many are struggling is no secret, and there are those that could benefit by finding out what options are available to avoid spending more than necessary. The path to feeling more secure, aware, and knowledgeable could be found by simply shopping for a remortgage and doing so sooner rather than later.