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Homeowners are starting to consider solutions to deal with their rising monthly mortgage costs. In fact, 45% of borrowers have revealed that they either have or are considering paying an early repayment charge on their mortgage deal in or to fix to a reduced rate, according to research from The Mortgage Lender (TML).
Of this, 7% of borrowers say they have already paid an early repayment charge in order to get a fixed mortgage deal to mitigate a rise in mortgage costs. 13% say they will do this, while a further 25% say they are considering it.
However, this could mean they are fixing onto a higher rate than necessary when mortgage rates are predicted to slowly come down in the next few years.
Previous research from TML found that half of homeowners with a fixed, tracker or discount mortgage are on deals that need to be renewed within the next two years. And, 25% of those who are expecting their mortgage costs to go up believe it will increase by an average extra cost of £441 a month.
In addition, 19% say they are already cutting back on spending in order to save for or pay increased costs. A further 27% say they will do this, and 30% are considering doing so.
Others are looking into options to boost their income to afford rising costs. 10% of homeowners revealed they have taken on extra work in order to afford their mortgage costs, with a further 18% planning to do so and 29% considering it.
Taking in lodgers is another route borrowers are considering in order to bring in additional funds, with 7% saying they have already done this. 10% say they will take on lodgers in the future, and 16% considering it. However, important legal considerations need to be factored in before becoming a resident landlord. For example, mortgage borrowers may need to check with their lenders, and it could impact other benefits and tax credits.
Downsizing or selling is another option homeowners are considering. 10% admitted they will be downsizing in order to reduce costs, and 20% said they are thinking about it. Some are even thinking about selling completely and going back to renting for the time being, sheltering them from increasing costs. Indeed 24% have said they either will do this or are contemplating it. However, with consumers also facing rent rises, it’s important homeowners speak to an adviser or broker to help assess whether this is the best option for them financially.
Encouragingly though, some borrowers are already looking for advice before they make any decision. 13% say they have already spoken to a mortgage broker to find the best possible deal. 27% said they will be doing this, and 25% say they will consider it.
Steve Griffiths, Head of Sales at The Mortgage Lender, comments: “It can’t be denied that the cost of living and rising costs are starting to bite, so it’s not surprising that borrowers are looking for ways to save their money. What’s vital is that they seek advice from a professional before making any changes. Encouragingly, we are seeing many people speaking to their brokers or planning to do so. Brokers play a pivotal role in supporting consumers make one of the biggest financial decisions in their lives and can help navigate the market to find the best possible deals that suit individual circumstances and factor in true costs.”
The research above was conducted between 4th November 2022 and 8th November 2022 when 2,000 UK adults (18 and over) were surveyed online.