22 September 2022
If you are covering the Bank of England interest rate decision to increase rates by 2.25%, please see the following comment from Karen Noye, mortgage expert at Quilter:
"Today’s interest rate hike represents the next step in Britain’s fight against rampant inflation and it is likely to cause some significant pain for mortgage borrowers both now and in the future.
"Some borrowers who opted for a long-term fixed rate deal a few months ago will be protected for the length of the term. However, anyone coming to the end of their fixed rate deal soon or on a tracker mortgage will see a considerable rise in their bills. Together energy bills, high food prices and increasing mortgage costs could be enough to force someone into mortgage arrears. Eventually this may lead to repossessions if missed payments persist.
"People’s finances are already stretched and while government has stepped in to avoid energy bills spiralling completely out of control, they are still likely to cause significant financial hardship this winter.
"How this translates into house prices increases or reductions is yet to be seen. News that as soon as tomorrow we could see a reduction in stamp duty might once again stoke the flames of a housing market potentially about to be extinguished due to the macroeconomic backdrop. A stamp duty cut could increase the number of people wanting to move and in doing so push house prices higher again.
"In the short term, this is not good news for first time buyers who are already struggling with high prices and less affordable mortgages due to interest rate hikes. However, often when there are more transactions happening in the market the number of new builds increases as house builders see demand and look to capitalise on it. This should at the very least create more stock as one of the primary drivers of ever increasing house prices is a significant lack of new build homes in the UK.
Three tips if you are struggling with your mortgage bills
Don’t bury your head in the sand
"Lenders will normally write to you within 15 days of a missed payment but if you are struggling with your bill, it is crucial that you talk to your lender before they contact you. Burying your head in the sand will only make things worse. Mortgage debt is what is described as a priority debt and as the name implies should be prioritised above most other types of debt you have.
Work out what you can afford to pay back
"Before picking up the phone to your lender take some time to work out exactly how much you can afford to pay back each month. There are budgeting tools available online or you could speak to a debt charity or Citizens Advice. If you have sought help, do let your lender know as showing that you have looked at ways of paying back your debt shows your serious about it and can help avoid repossession orders down the line.
Discuss ways of making payments
"Lenders have a duty to act fairly with customers who are having difficulties and having a frank conversation with your lender can help them find a way for you to avoid the problem spiralling out of control. Lenders might be able to put you on a payment plan based on what you can afford to pay back and this could mean extending your mortgage term or if your home is worth more than the mortgage, you might be able to add your arrears to the total amount you owe and pay it back over the lifetime of the mortgage. Seeking advice before opting for any plan is worthwhile as some plans may end up with you paying much more interest over the lifetime of your mortgage."