Did you know we could secure a remortgage/product transfer 6 months before your existing fixed rate ends
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Why Mortgage Advice is crucial amid the cost-of-living crisis.
With the rate of inflation at a 30-year high and the expectation that it will climb higher in April. We are all finding that the escalating living costs, along with the recent Bank of England (BoE) interest rate rise from 0.5% to 0.75% and soaring energy prices are pushing our household budgets to the limit.
It has therefore, never been more important for all mortgage holders and potential borrowers to consider their mortgage and ensure they are getting the best deal possible. The increase in BoE interest rate will impact the interest rates on our household finances, particularly as lenders have already started increasing their fixed rate products.
Mortgage Brokers have access to a wide range of mortgage lenders and a variety of products and can therefore help borrowers find the right deal for them and possibly save money with lower repayments.
While those on a fixed-rate mortgage are protected from changes in the base rate until their current deal expires, for those on a standard variable rate, the increase to the base rate means the cost of monthly mortgage repayments will almost certainly go up, placing further pressure on household income
Keep me up to date with the latest info on rates, products and services we think you might be interested in
How do I get a competitive mortgage interest rate?
Mortgage rates have already started to increase, there is still competition in the market and competitive rates are available. However, these might not be around for long, especially if the Bank of England increases rates again.
If you have any of the following, you need to contact a mortgage adviser today:
- You are currently on the lenders Standard Variable Rate (SVR), it’s likely you’ve seen your payment increase recently.
- You are on a mortgage product (such as a fixed rate, discount or tracker) that is due to end in the next 6 months.
- You have a mortgage product with more than 6 months to run, but your circumstances have changed.
- You aren’t sure on your mortgage details and you need to speak to someone to clarify.
It’s basically a good idea to speak to a mortgage adviser today, as even if its not worth you changing your mortgage now, they can make a note to contact you when it is the right time, meaning you are always ready to get the best deals and don’t move to the lenders, likely higher, standard variable rate, which would increase your mortgage payments.
What information will I need?
Before you talk to a mortgage adviser, it is good if you know the following, but don’t worry if you don’t, a mortgage adviser can help you find the information and guide you.
- Current product type – fixed, tracker, discount, standard variable rate
- The date your current product ends
- The current interest rate
- Currently monthly payments
- Mortgage term remaining (how long until your mortgage is fully repaid)
- Any early repayment charges
This information is normally found in your mortgage offer but should also be provided by the mortgage lender within an annual statement. If you can’t find any of those, a quick call to the lender means you can obtain the information. Whilst you are contacting your existing lender, you can ask them if the have any new products available to you. Don’t take one immediately, let the mortgage adviser compare it to other products from across the market.
How does the rise affect my mortgage?
The base rate rise is likely to have some impact on all of us, affecting the rate we pay for mortgages, car loans, credit cards and more. The increase means the cost of borrowing money will increase, and those who are already in agreements outside of a fixed rate will see a rise in their outgoings.
We have highlighted below what your mortgage payments would rise by over 1%.
I contacted Clever Mortgages as I have used them before, I have good credit. It literally was a 30 minute phone call, they took my details and within 24 hours came back to me with a fixed rate of 5 years, saving me £55 per month which will help. The mortgage is with my same lender so it was really simple. And my fixed rate starts straight after my old one ends so its locked in even if things rise again. Cant thank them enough for making something I was worried about so simple.
Example
| Current mortgage | Term | Rate | Monthly payment | +0.25% | +0.5% | +1% |
| £100,000 | 20 years | 2% | £505.88 | £517.81 | £529.90 | £554.60 |
| £150,000 | 20 years | 2% | £758.83 | £776.71 | £794.85 | £831.90 |
| £200,000 | 20 years | 2% | £1,011.77 | £1,035.62 | £1,059.81 | £1,109.20 |
| £250,000 | 20 years | 2% | £1,264.71 | £1,294.52 | £1,324.76 | £1,386.49 |
| £300,000 | 20 years | 2% | £1,517.65 | £1,553.42 | £1,589.71 | £1,663.79 |
| £400,000 | 20 years | 2% | £2,023.53 | £2,071.23 | £2,119.61 | £2,218.39 |
Borrowers should make it a priority to review their options with a broker, as moving to a fixed rate could help to free up some of their monthly income, which will help with budgeting by locking in a set repayment amount every month for the length of the term. This is especially important given the fact that further interest rate rises are expected.
By speaking to Clever Mortgages, borrowers worried about rate rises can be assured that we can help to secure the best outcome for you as our customer.
This means finding the most appropriate and affordable product to fit your current circumstances, which will help to alleviate some of the current financial pressures facing households.
The cost of living
We have all seen the cost of fuel and our food shop increase over the last few months, but further increases are on the way in April to council tax, gas and electric, water, broadband, mobiles, TV packages and stamps. Furthermore National Insurance and Medical Prescriptions are set to increase
Could a Remortgage to consolidate some other debts help?
You can remortgage to raise capital to consolidate debts as long as you have enough equity in your property and qualify for a bigger mortgage either with your current lender or an alternative one.
Currently, the maximum loan to value (LTV) ratio for a remortgage with most lenders is 90%, so if your property is worth £200,000, the total maximum borrowing, including your existing mortgage, would be £180,000. Let’s say your current mortgage is £170,000. This means you could potentially borrow an extra £10,000 to consolidate your debt’s dependent on affordability and your credit rating.
Although you’d be settling up your debts, you’d effectively just moving the debt onto your mortgage and paying interest on it for a longer term. This is something you really need to consider when securing unsecured debt and your Mortgage Broker would fully cover this with you.
However, you could also remortgage to another lender and potentially reduce your monthly payments, freeing up capital for additional income to pay towards your debts.
What is best Remortgage vs Product transfer?
This will all be down to your individual circumstances, but a Mortgage Broker will review both options.
Remortgaging entails finding a new lender and taking out a new mortgage, repaying your old one and beginning repayments to your new lender. This can help homeowners access better deals and rates, especially if the value of your property has increased since taking the Mortgage. Some people remortgage to raise additional funds for the likes of home improvements, some remortgage because a fixed term deal is ending and others simply wish to find a better deal, especially if your credit was impaired when you took the original Mortgage.
remortgages, with Product Transfers you stay with the same lender but move onto a new product. Again, you don’t always know if you’re getting the best deal when only looking at one lender so it’s still wise to get advice to make sure you’re making the right choice.
Although now may be the best time to switch, it’s still important to bear in mind lenders still have their own criteria and affordability checks to adhere to before they’re able to decide on a mortgage application. The rates you could be offered will be based on a range of factors, such as your credit history, income and expenditure, the loan to value (LTV) ratio of your property and how much you’re looking to borrow. Expert advice is worth its weight in gold here, helping you wade through the countless deals and finding the lenders that are most likely to accept your application, preventing rejections harming your credit score and mortgage chances.
What other debt consolidation options are there?
A remortgage to consolidate debt can be the cheapest option, but if it’s not possible, for example, circumstances mean leaving your current mortgage as it is would be the best option (because you have an amazing rate), then you could consolidate the debt on a secured loan, or even on an unsecured loan.
Secured loans
Secured loan rates tend to be much higher than mortgage rates, with rates ranging anywhere from 7%-30%+, depending on your credit score. The upside of secured loans is that you can take them over as long a term as possible and, in theory, borrow as much as you like (within limits of LTV and affordability).
How else can I help my finances?
Budget
Writing down or completing a spreadsheet of your income and what you’ve got going out is one of the key steps to keeping your finances on track. Once you’ve done this, you’ll be able to see what changes you can make to improve your financial situation, along with what you can’t change.
Get the balance right
Making a budget is like going on a diet, if you cut back on everything that you enjoy it’s not something that you’ll find easy to adapt to. In fact, cutting back on too much from your budget is unrealistic and unsustainable, and it can have a negative impact on your mental health and wellbeing too.
Split your expenses into categories: essential costs, things that are nice to have and things that you don’t need.
Essential costs could be costs like rent, mortgage, utility bills, TV licence, council tax, travel costs, food and toiletries. Things that are nice to have could be socialising costs and a takeaway. Costs that you don’t need might be a membership for a gym you rarely go to or a TV subscription that you don’t use.
Understand your credit report
Your credit report is a record of how you’ve managed your finances over the last six years. It shows things like what credit you’ve applied for, how you pay for your bills, if you’ve kept up-to-date with payments and how long you’ve had each account.
Find out more about how to improve your credit score here.
https://www.clever-mortgages.co.uk/credit-scores-the-good-the-bad-and-the-average/
Check your insurances and tariffs
Check what’s available and find the best rates for the cover you need – whether that’s cover for your house, pet, car insurance or gadgets. Don’t forget that some packaged bank accounts include mobile phone insurance, breakdown cover or travel insurance anyway, so don’t pay twice and take advantage of the policies you’re already paying for!
To compare your life and home insurance speak to us today on 0800 197 0504 or visit us at www.clever-mortgages.co.uk to see if we can reduce these payments.
Is it time to switch?
If you’re managing to keep on top of your monthly payments to your credit cards, but your 0% interest or low interest rate is going to end, it could be time to part ways with your provider and find a better deal. Shop around on comparison sites to see what alternatives could be available for you, some cards even give rewards like cash back, air miles or vouchers.
There could be fees applied when you balance transfer to a new card, so check what these are before you apply, and make sure that they won’t work out more than the interest on the card you’ve already got.
If you’re going to swap, make sure you’re eligible before you apply! Every application you make will go on your credit report, even if you get rejected. So be careful when applying for credit, as a lot of applications which are rejected will show negatively on your credit report.
If you’re presently looking at your Mortgage it would be best to leave any new credit cards changes until after the Mortgage has completed.
Cancel un-used subscriptions
Take a look through your subscriptions to things like TV and music streaming, fitness apps and magazine for example. Figure out which ones you still actually use and consider cutting back on those you don’t to save yourself some money!
If you are struggling with unsecured debts and need help?
Speak to a debt advisers, Payplan offer free, simple debt advice to anyone who needs it.
For FREE debt help and advice:
Fill in the form on https://www.payplan.com/debt-help/with your details and one of their advisers will call you back.
Or call them FREE on 0800 280 2816 – they are open from 8am-8pm Monday to Friday and 9am-3pm on Saturdays
Why not ask us some questions?
We know every clients circumstances are different, our Mortgage Brokers are experts in all different Mortgage Subjects whether it’s about Remortgage or you are looking to move or purchase your first home.
Visit us at www.clever-mortgages.co.uk where you can chat to us live or call us on 0800 197 0504.
Mortgage product Types:
Tracker mortgages: Tracker mortgages ‘track’ the Bank of England base rate with an additional percentage tacked on to ensure the lender makes a return. Similar, to other mortgage products, the tracker rate is often offered for a set period of time before moving onto the lenders standard variable rate (SVR), normally 2 to 3 years.
Tracker mortgages: carry an element of risk, as the interest rate could go up or down and this results in an immediate change to the monthly mortgage payment. Since the Bank of England base rate has increased, those on a tracker product will now have a higher monthly mortgage payment and this could continue over the coming years.
Standard Variable Rate (SVR) mortgages: Generally speaking, SVR rates are the interest rates homeowners revert to once an initial mortgage rate has ended, usually after 2 to 5 years of the mortgage. The SVR is set by the lender and unless you’re on a deal, it’s likely this is the rate you’ll be paying. SVR mortgages can work out more expensive than other mortgage products and the lender can raise or lower the rate as they see fit. The base rate rise may not see you paying as much as a tracker mortgage, but repayments are likely to go up in cost for SVR mortgages and this will only increase over time.
It’s fairly commonplace for homeowners to remortgage when approaching the end of an initial mortgage product, and with the base rate not going down any time soon it’s wise to check if you’re really getting the best deal available.
Discount mortgages: Discount mortgages offer interest rates slightly below the lenders SVR for a set term, but if the SVR goes up then so do the repayments. Again, the variability of this mortgage type means homeowners are going to be forking out more to meet their monthly repayments.
Fixed-rate mortgages: Fixed-rate mortgages create a brief respite from the financial turmoil, offering a stable and secured rate over a set period of years, this means your mortgage payment is known. UK homeowners currently on fixed-rate mortgages shouldn’t expect to see an increase in repayments, but those approaching the end of their fixed term should seek to speak to an expert about securing a product transfer or remortgage deal before the base rate rises again. With the cost of borrowing going up, locking in a deal sooner rather than later could wind up saving you a fair chunk. You can talk to a mortgage broker up to 6 months before your mortgage product is due to expire.
