Advice for homeowners in the Maldon District as mortgage rates soar
By Ben Shahrabi
4th Jul 2023 | Local News
Interest rates have risen to a 15-year high amid efforts to reduce "stubborn" inflation, so homeowners in the Maldon District may be seeking urgent advice.
This morning, it was announced a typical five-year fixed mortgage deal had an interest rate of more than six per cent.
Bryan Ledger, Director at the Woodham Walter-based Mortgage Clinic, says variable rate mortgage holders could see an immediate increase to their payments, although circumstances are trickier for those on fixed-rate mortgages.
"Most people don't understand why the rates are moving – they're just feeling the consequences of it," Bryan said.
Anybody on a variable rate or who goes on to a tracker is likely to be immediately affected by increasing bank base rates.
While fixed rate mortgages are not affected straight away, the cost of borrowing will increase as the base rate does.
However, those who opt for a discounted or 'tracker' rate could benefit if rates start to go down. Meanwhile, those on a fixed rate for five or more years will be stuck at their original rate.
Those locked in for a shorter period will have the freedom to switch to a lower rate sooner, but risk losing out if rates increase.
"It's a gamble – things can go anywhere. But people are realising they've got sizeable increases in their outgoings which they've got no control over."
The Bank of England's target is to reduce inflation to 2 per cent from its current rate of 8.7 per cent, which Bryan says is unrealistic.
"They should be aiming for four or five per cent," he said.
The Mortgage Clinic's four tips for homeowners with mortgages:
- Seek advice from a qualified broker, like the Mortgage Clinic. They will run through your finances and guide you. "The days of going online and trying to snap up a rate are gone," Bryan says.
- Be flexible and sign up quickly, with advice. Speak to your lender as soon as possible. Some support schemes are very valid, allowing people to adjust their payments, as long as they don't affect your credit rating. It is important for the lender to assure you it won't affect your credit file.
- Approach your lender to see if you can go 'interest only' for a period. If you're on repayment, dropping to interest only means you won't be paying the capital element. That will help reduce payments slightly for a short time.
- Ask to extend your term. Younger borrowers will have a better chance at this than older people, as lenders might be nervous about extending their term. This has a long-term benefit of reducing monthly payments, but it does mean you'll pay for a longer period and with more interest.
Bryan says The Mortgage Clinic is "here to listen" and is happy to provide free guidance to clients as they may use another of his services.
He said: "I'm more than happy to talk to people, even if there's no immediate business. The larger brokers are target-driven, so are not as receptive to people's problems.
"Meanwhile, independent brokers excel in trying to help people. It's relationship building - it's a bonus for the future."
For more information about The Mortgage Clinic, visit the website.
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