Ten tips for managing an interest rate rise on your mortgage

There is no escaping from the fact that mortgage rates have increased, and more homeowners are struggling to make their monthly repayments.

According to UK Finance, the collective voice of the banking and finance industry, around 1.4 million people are coming off fixed-rate mortgages this year. This means many homeowners will swap to a rate starting with a five or six.

You can take steps to try and lower the repayment shock by getting a new mortgage agreed up to six months in advance of your current mortgage finishing. You may also be able to stretch the mortgage term or swap to interest only or part interest only. 

Here are Trinity Financial's top ten tips!

Avoid your lender's standard variable rate

If your mortgage is coming up for renewal, it is essential to make sure you avoid reverting to your lender's standard variable rate.

According to UK Finance, 773,000 residential and 362,000 buy-to-let borrowers are currently on standard variable rates (SVR).

Getting caught on a lender's SVR could be extremely expensive. Many banks and building societies' automatic reversion rate for borrowers who do not act to switch deals is well over 7%. Halifax, the UK's largest mortgage lender, recently increased its SVR rate to 8.49%, its highest level since November 1998.

Extend your mortgage term or switch to interest-only

Some mortgage lenders may allow you to switch to interest-only to reduce your mortgage repayments or swap to interest-only if you are struggling.

If you have a £300,00 mortgage at 5.5%, the monthly mortgage repayments would be £1,842.26 over a 25-year term, reducing to £1,703.37 over 30 years. It would cost £1,375 on interest-only.

It is important to note that if you extend the term, you pay much more interest over the life of your mortgage and on interest-only you would still need a plan to repay the outstanding debt.

Remortgage to get the best deal

Figures from UK Finance show that 87% of remortgagers opted to take a product transfer with their bank or building society, rather than switching to another mortgage provider last year.

More homeowners should research the mortgage market to find out if they can secure a cheaper mortgage before they lock themselves into a new deal with their existing lender. This is even more important if they are taking a longer-term fixed rate. 

While it may be a hassle to refinance to another lender there are potentially significant savings, especially if your lender has just put up its rates.

Trinity Financial monitors the mortgage market and regularly sees lenders put up rates significantly, which means other lenders' rates are much cheaper until they act to push up their prices too.

Call Trinity Financial's brokers on 020 7016 0790 to find out which lender will offer you the most competitively priced mortgage.

Help from a family member with an offset mortgage

Recent stories in the press say the Bank of Mum and Dad has been as busy as ever, with more parents helping their grown-up children pay their mortgages.

According to research by Saltus Wealth, a fifth of parents have recently sacrificed their financial stability for the good of their children.

One option is for borrowers to remortgage to an offset product once they have asked their parents to use their savings. Savings can be used to offset their mortgage balance and lower their repayments. Once the borrowers are in a better financial situation, the parents can access their savings again. 

Base rate changes to tackle inflation bring volatility to the mortgage market

Incredibly the Bank of England put up the base rate by 0.5% to 5% last week with its 13^th consecutive rate hike.

Banks and building societies tend to increase the number of rate changes they make in the run-up to base rate announcements, so it is worth noting that there are going to be more changes the closer we get to the Monetary Policy Committees' interest rate decision.

Restructure your finances when you come to remortgage

Trinity Financial's brokers regularly speak to borrowers seeking advice about managing unsecured debt like credit cards or loans.

Sometimes, it makes sense to repay the debt by taking additional borrowing against their home when they come to remortgage.

It is also common to speak to people who cannot get a sufficiently large mortgage because they have cars on finance. 

The overwhelming majority of new cars, along with many used cars, are purchased using finance agreements. Some homeowners will need to reassess and consider if it makes sense to pay out so much for a car, or in many cases two cars on finance.

Speak to Trinty Financial or your mortgage lender if you're struggling with your repayments

If you are struggling with your mortgage repayments, our experts will be happy to provide advice and let you know what we can do to help you refinance to secure a more suitable mortgage.

It is important to notify your lender or any finance provider before you miss any payments on credit agreements, like mortgages, loans, credit cards, etc.

If you let them know you may be able to avoid damaging your credit record. Many people with blips on their credit records find it much harder to access competitively priced mortgages. 

32 lenders commit to Mortgage Charter

Chancellor Jeremy Hunt says 32 mortgage lenders have signed the Mortgage Charter, designed to help borrowers struggling to meet their mortgage repayments. 

From 26th June, mortgage lenders have agreed that borrowers will not be forced to leave their homes, without exceptional circumstances, in less than a year from their first missed payment. A payment concession, including a zero-payment concession, may be possible "if appropriate".

More homeowners should be able to temporarily switch to interest only for six months or extend their mortgage term to lower their monthly repayments. 

Letting out a spare room (if you have one)

Many homeowners worried about their mortgage repayments will be considering letting out spare rooms to cope with their increased mortgage costs. 

The Government Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

It is generally acceptable for homeowners to let a room without asking for permission from their lenders unless they use companies like Airbnb. Some lenders offer specialist Airbnb mortgages while others are more strict and do not allow homes to be listed on the property letting portal.

If you need to let your property, you will need to ask for permission to let. Some lenders will keep your rate the same, while others increase it by approximately two per cent.

There may also be a limit on the amount of time the property can be let without the mortgage being switched to a buy-to-let. 

Call Trinity Financial on 020 7016 0790 to secure a mortgage or book a consultation 

The information contained within was correct at the time of publication but is subject to change

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage