For most people, rent or mortgage repayments are their biggest monthly cost, and even small percentage rises can result in large cost increases which may be hard to manage in personal budgets.
The rising cost of living has put more pressure on people’s budgets and the recent turbulence in the mortgage market has only added to those concerns. But, there are some things you can do to provide reassurance and to seek help if your housing costs are a worry.
Renting
1. Deposits
In England and Wales rental deposits should be protected through the Tenancy Deposit Protection scheme (applicable to short-hold tenancy starting after 6 April 2007)
2. Rent increases
Understand the timing, circumstances and notice period in which your landlord could raise your rent. Your tenancy agreement should set all these out. See information about your rights and responsibilities.
3. Struggling to meet your rent
If after revisiting your budget you still expect to struggle to meet your rent, act straightaway:
- Speak to your landlord to try to agree an alternative repayment plan
- Check with your employer – some may offer hardship loans or salary advances
- Use some of your emergency fund to ‘top up’ what you can afford to meet your costs over the short term
- Check if you’re eligible for benefits or grants
4. Preparing for 'plan B'
Prepare a plan with family or friends so you have the reassurance you will have somewhere to move to if you have to or if you are evicted. Charities including Shelter and Citizen’s Advice can help
Those with or applying for new mortgages
1. Things to build into your plan
When applying for a first mortgage or re-mortgaging:
- The average mortgage rates have been increasing since the end of 2021 and they now typically sit between 5% and 6%, as a result of many lenders not offering their full mortgage range at the moment. But things are still evolving and this may change in the future so it’s worth keeping a regular check on what’s available
- Because of the record number of applications, the whole process is now taking longer, so build in extra time
- Because of the market turbulence and rising interest rates, many lenders are now ‘stress testing’ affordability at higher rates. Use a mortgage calculator to see your affordable range and consider building in some spare headroom as a contingency to allow for possible future rises
2. Variable rate/tracker mortgages
Your monthly mortgage repayments will move in line with mortgage rate changes. Use a mortgage calculator to see the difference a rate rise could mean for your repayment costs
3. Considering re-mortgaging?
If you are nearing the end of your current mortgage term or you want to rearrange to improve your terms, make sure you check your current mortgage for early termination costs and build the costs of remortgaging into your budget e.g. arrangement fee, booking fee, revaluation fee, legal fee, mortgage broker fee
4. Creditworthiness
This is an important check that providers will make when assessing your mortgage application. So do everything you can to boost your creditworthiness before applying
5. Struggling to meet mortgage repayments
Talk to your mortgage provider as early as possible. Many will work with you to agree an alternative repayment plan. Consider using your emergency fund and other savings to top up your monthly mortgage repayments. Talk to your employer as some may offer hardship loans or salary advances to help in the short term.
Your home may be repossessed if you do not keep up with repayments on your mortgage, or other loan secured on it.
Your home is more than just a roof over your head. In a turbulent market, doing what you can to be aware of the potential impact of expected future change and taking steps to prepare yourself can help to provide some control and reassurance. And if there’s something you need support with, don’t delay in getting help.