A recent report forecasted that an estimated 356,000 mortgage holders could find it difficult to pay their repayments, if at all, by summer of 2024. This could come as a surprise to some. It does, after all, forecast difficulties for homeowners into next year. They wouldn’t be wrong in being taken aback due to the many reports showing that inflation might have reached its peak and that corrections to the economy could be at work and all will be well soon. 

The truth is that despite any improvement to the economy, it could take much longer for consumers to come out of the difficulties that have been a strain for a long while. There was Brexit, then the global pandemic, then the War in Ukraine causing unusual energy strains, then inflation, and to follow were quick increases to the Bank of England’s standard base interest rate.

The Bank’s Monetary Policy Committee (MPC) has increased the base rate during the last ten consecutive meetings. From December 2021, the rate was hiked from almost zero at 0.1% to 0.25% and nine meetings later it was changed to 4.0% in February. The March meeting could produce yet another increase.

The impact to borrowers could be more than just a strain on top of the many other financial impacts already taking a toll on household budgets. Unfortunately, there are many homeowners completely unaware of what is lurking in the days ahead for them.

Content and safe under their current historically low interest rate with a fixed rate keeping them shielded from recent rate hikes, their mortgage term could be close to expiring. When their mortgage term ends they will face different interest rate levels and find a once affordable repayment is now not so much.

When a mortgage term ends, the homeowner could remortgage or if they choose to ignore that opportunity they will be moved to their lender’s standard variable rate (SVR). A SVR normally has a higher interest rate which equates to more expensive borrowing and higher repayments. For instance, recently the average remortgage interest rate for a five year fixed rate deal was a bit over 5% while a SVR was over 7%. Not only would a SVR cost more, but it is a variable rate which means it is subject to future rate hikes.

Rather than pay more than necessary, homeowners could consider a remortgage. Shopping for possible deals is quick and easy to do online. Simply visiting the website of a remortgage lender could put a quote in hand. Going to several lender sites will offer many to compare against each other to discover the best remortgage deal.

It is even easier and quicker to shop online for a remortgage when visiting the website of a remortgage broker. Brokers offer quotes from a variety of lenders in a one-stop shopping experience. In a matter of minutes, a homeowner could have several quotes to review and compare. Brokers could also have exclusive deals not offered directly from lenders to borrowers which might make shopping with them a smart strategy.

As predicted, there will be many homeowners finding it difficult to handle their repayments in the months ahead, especially those that come to the end of their term and must face higher rates to choose from in comparison to their previous historically low rate. Going from a 2% interest rate to one over double is a financial shock to almost any budget. However, rather than face such a dilemma, it would be good to review one’s current mortgage and get acquainted with the interest rate and when their term ends.

Some homeowners have chosen to take on a penalty fee to end their term early. It allows them to remortgage at current rates rather than wait out their term and possibly be forced to choose from higher rates than those available now. This is not the best choice for every homeowner, but certainly a consideration. It could only be determined when choosing to remortgage shop and discover what deals are available. 

There are experts encouraging lenders to work with homeowners. Also, there are suggestions for schemes to be put in place for homeowners. There are possibilities ahead, but meanwhile it is up to homeowners to look out for themselves. Take advantage of any opportunities presented by lenders, and looking into helpful solutions is important to do sooner rather than later. However, put loyalty aside and also consider a remortgage to find perhaps the best remortgage deal outside of your current lender.

The recovery process for the UK economy, even without any bumps in the road ahead, could take a long while. The path to recovery for consumers, including and perhaps especially for homeowners, could take even longer. 

Peace of mind and savings from being put on a SVR and even protection from further rate hikes could be within reach by choosing to spend a simple few minutes online shopping for a remortgage deal.