The past few months have seen many regular bills and the prices for household essentials increase substantially, with energy bills doubling for many households. However, mortgage bills are expected to increase at a similar level.
With the Bank of England’s base rate having increased multiple times in 2022 alone, mortgage lenders have increased their standard variable rates and tracker rates to match, which combined with other financial pressures has the potential to cause a mortgage shock.
An economic shock is when an unpredictable external event has a huge impact on people’s finances, and a mortgage shock is a similar phenomenon, where a range of outside factors have contrived to drive up the cost of mortgage repayments.
At this time, the best way to weather the storm is to contact a mortgage broker to see if you currently have the best deal for the short and medium term.
As well as this, here are some top tips to batten down the hatches and prepare as best you can for a potential mortgage shock.
Fix Your Rate As Soon As Possible
If you are not on a fixed deal or if your deal is expiring get onto a fixed mortgage rate as soon as possible to avoid potential rate spikes in the months and years ahead.
This will provide stability and avoid potential further mortgage shocks for the lifetime of the fixed deal, which is typically up to five years.
Look Into Switching Early
If you are at the end of your current deal, it may be worth consulting your broker to see if it is worth getting out early and switching to a different fixed-rate deal that will see you through the foreseeable future.
Naturally, there is an early repayment charge to consider but in some cases, it can work out to be more economically viable this way.
Switch To Interest Only
This is an exceptionally short-term solution that should be very carefully considered before you take it, but if you are struggling already with your mortgage repayments before the rates increase, it may be worth switching to interest-only to give yourself some headroom to plan your next move.
A less drastic alternative is to lengthen your mortgage term, which would increase your interest payments in the long term but help to lower payments now.
