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  • Steve Beeton

4 practical steps you could take if you’re struggling to pay your mortgage

To tackle persistent inflation, the Bank of England (BoE) has increased the base interest rate 14 times since December 2021. As of September 2023, it stands at 5.25% – the highest seen in 15 years. As a result, millions of homeowners are struggling to afford their mortgage repayments.

If you have a fixed-rate deal that’s coming to an end, you could face going from paying interest rates of less than 2% to having to find the means to pay more than double what you’ve been used to.

While the rate you could secure will depend on your own particular circumstances, the current best-available rates are around 5%.

Fortunately, the government has stepped in to offer support to UK mortgage holders. In June 2023, a new Mortgage Charter was introduced.

Key measures of the Mortgage Charter

• Concerned customers can call their lender for support

– vitally, these interactions will not affect your credit score.

• You can secure a new fixed-rate deal up to six months before your existing agreement ends – plus you are free to pursue new agreements right up until your remortgage date.

• Some customers can switch to an interest-only mortgage or extend their mortgage term – each option can be taken without a new affordability check, and neither will affect your credit score.

• Some mortgage holders may be able to remortgage without an affordability check – this could help ensure that you’re able to get the mortgage that’s right for you when your term ends, without worrying that your finances won’t measure up on paper. It may also mean that you needn’t worry about how your decisions now could influence your future borrowing options.

• Customers won’t be forced to have their homes repossessed 12 months after their first missed payment – this could provide immense peace of mind if you’re finding it hard to keep up with repayments in the short term.

If you’re among the many struggling to meet higher mortgage repayments, here are a few practical suggestions that may help reduce the stress.

1 Scrutinise your household budget

Going through your monthly expenses with a fine-tooth comb may reveal possible savings, allowing you to divert extra cash towards your mortgage. With a clear idea of where you may be able to make savings, you could find meeting increased mortgage repayments a little easier.

2 Claim any protection insurance you have

If you’re struggling to cover your household costs due to injury or sickness, you may have insurance that could bolster your monthly income.

Mortgage payment protection is by no means obligatory, but if you do have it, the insurance should pay out if you’re unable to work due to an accident, illness, or redundancy.

Alternatively, you may have other insurance that could pay out in the event that you’re unable to work. Income protection insurance, for example, pays out a set amount of income in the event of accident or sickness until you’re strong enough to return to work or reach retirement.

3 Take advantage of the Mortgage Charter and switch to interest-only payments for six months

Most people have a repayment mortgage, where each month you pay off some of the capital and the interest charged.

The Mortgage Charter allows you to switch to an interest-only mortgage for up to six months. This could help to make the costs more manageable for a period, granting you time to figure out your finances. Following the six-month respite period, your usual schedule of repayments covering both capital and interest will restart.

4 Extend your mortgage term

Stretching your mortgage term to spread the cost of repayments – by adding five years to the term, for example – can help reduce the amount of capital you’ll be repaying every month.

repaying every month.

You’re free to choose how long you’d like to extend your term, as long as it is within the lender’s maximum allowed mortgage term and doesn’t go beyond your expected retirement age.

Beware though, while extending your mortgage over a longer term may help you benefit from a lower monthly payment, over the long term, you’ll end up paying more interest to the lender.

To put this in perspective, assuming a 5% interest rate, although extending a typical £200,000 mortgage from 25 to 30 years could save you £95.54 on your monthly repayments, the relatively small saving now could cost you more than £35,500 in interest over the long term.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Get in touch If you’re struggling to meet your monthly mortgage payments, you should talk to us sooner rather than later. We’re here to help and can explain your options and give you the expert advice you need.

Approved by The Openwork Partnership on 16.10.2023

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Berechurch Financial Solutions is a trading name of Steven Beeton which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

The information on this website is subject to the UK regulatory regime and is therefore targeted at consumers in the UK.

© 2023 Berechurch Financial Solutions
Approved by The Openwork Partnership on 19/06/2024

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