Beat the Big Squeeze! What interest rate hikes mean for your mortgage

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The Bank of England’s decision to raise interest rates amid rising inflation, combined with turmoil in global financial markets, impacted mortgage lending.

Lenders set rates based on the cost of mortgage market pricing, which has recently increased.

With some household budgets already strained, you may have questions about your mortgage or wondering what impact recent developments might have on you.

Current changes in the mortgage market may affect people with mortgages and those looking to join the homeownership ladder

With our ‘Beat the Big Squeeze’ series, presented in partnership with Halifax, we bring you useful and practical advice on how to deal with the cost of living crisis.

So far, we’ve provided an overview of the crisis, delved into the issue of rising energy bills, and shown where you can go for help with money worries.

This week, we take a look at what’s behind rising interest rates and what it could mean for your mortgage.

We’ll also look at some of the main questions you might have about your mortgage and where you can go for expert help.

Finally, we’ll also look at what support is available for people considering buying.

Other articles will be published as part of the Beat the Big Pressure series in the coming weeks, so keep an eye out to make sure you never miss one.

Why are mortgage rates rising?

Inflation is currently hovering around 10%, according to the Office of National Statistics.

One of the main reasons for the high inflation is soaring energy costs, including rising gas and crude oil prices.

When inflation rises, interest rates tend to rise too.

Lenders set rates based on the cost of mortgage market pricing, which has recently increased

Lenders set rates based on the cost of mortgage market pricing, which has recently increased

This, in turn, increases the cost of pricing the mortgage market, which can also drive up the price of some customer transactions.

Although the context remains uncertain, more volatility is expected in the coming months.

How could my mortgage be affected?

In recent months, many banks and lenders have changed their mortgage lines, leaving some people wondering if their existing mortgage offers could be withdrawn.

However, if you have already completed your mortgage application and received an official mortgage offer, it is rare for lenders to subsequently withdraw the agreement.

If you have applied for a mortgage but have not yet received your offer, your lender may attempt to honor the rate you requested, provided the application meets the loan criteria.

The evolution of the mortgage market also affected the monthly payments made by certain borrowers.

Whether you see an increase in your mortgage payments depends on the type of mortgage you have. If you are unsure, refer to your last correspondence with your lender or contact them to ask.

Those with tracker mortgages see their payments increase almost immediately when the Bank of England base rate rises.

People on variable rates are also likely to see increases.

Over the past few months, many lenders have changed their mortgage lineups, leaving some people wondering if their existing mortgage offers could be withdrawn.

Over the past few months, many lenders have changed their mortgage lineups, leaving some people wondering if their existing mortgage offers could be withdrawn.

Fortunately, the vast majority of borrowers have fixed rate mortgages, where the interest rate remains the same for an agreed period of time.

These individuals will be sheltered from increases until the end of the period.

If your fixed rate ends and you haven’t signed a new mortgage agreement, most lenders will automatically offer you a standard variable rate.

If you choose to upgrade to a new plan before your current plan expires, it’s worth checking to see if you have to pay any fees, such as an early redemption charge (ERC).

Where can I ask for help?

While we’ve already looked at some of the questions people often ask about mortgages, you may have more.

If this applies to you, Citizens Advice has a handy section on managing your mortgage.

You’ll find lots of helpful tips, as well as ways to deal with an increase in your mortgage payments.

If you’re already having trouble paying your mortgage or have fallen behind on your repayments, it’s important to get help to avoid falling further behind.

First, it’s always best to contact your bank or lender.

If you are in debt and need advice to get back on track, charities Stage change and National debt line provide help online or over the phone.

For anyone struggling with mortgage repayments, it is always best to contact your bank or lender

For anyone struggling with mortgage repayments, it is always best to contact your bank or lender

Money worries can sometimes affect your mental health.

For free assistance, you can visit the Mental Health and Financial Advice Website for a list of organizations that could help you.

If people have questions about their mortgages, they should talk to their lender.

Many lenders have provided online support, such as Halifax, whose customers can find answers to some of the most common mortgage questions on their website.

If you’re a Halifax customer and need help, you can chat with one of their mortgage experts at a branch, over the phone, or via video call (For more information, click here).

Halifax customers can also visit the money worries from their website for more advice on where you can seek help if you are in financial difficulty.

What if I’m thinking of buying?

If you are considering taking out a mortgage on a property and would like more information on how the process works, the Financial aid the website is a good place to start.

You may be able to get help from the government to buy a house. For a list of available programs, Click here.

For more useful tools and support, you can also visit the Halifax website home loan page.

Alternatively, you can try visiting a Halifax Home Hub. Present in some branches, these are dedicated areas for buying a home where you can go to speak with an experienced mortgage and protection advisor and with colleagues.

They can guide you through the home buying process and put a plan in place to get you to the next step on the property ladder. More information can be found here.

Customers who do not live near a Home Hub can visit their local branch or speak to a Halifax advisor by phone or video.

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