Home owners warned 'not to bury head in sand' over rising mortgage costs

It's worth doing your sums to work out your mortgage, says Keith Hood

Home owners have been urged not to 'bury their heads in the sand' over difficulties with mortgage repayments - Credit: Getty Images/iStockphoto

Suffolk homeowners have been urged "not to bury their heads in the sand" over mortgage repayments as rising interest rates add further pressure to household finances. 

Interest rates increased from 1% to 1.25% last month, the fifth consecutive rise, pushing them to the highest level in 13 years and the base rate could climb higher. 

The increase comes as household finances are being squeezed by the rising cost of living, driven by record fuel and energy prices.

A year ago, with interest rates at just 0.1%, the average UK homebuyer on a variable rate mortgage was paying £38.15 per day in costs and that remained largely unchanged throughout 2021.

The rates rise now means their mortgage is now costing them £43.38 per day — a 14% increase in 12 months of around £160 per month. 

The average two-year fixed-rate mortgage deal also went up 0.49% between June and July, the biggest monthly rise on record, according to data firm Moneyfacts. 

The average five-year fixed-rate mortgage also climbed a record 0.52%. 

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It is estimated around 40% of UK mortgages are expected to go up over the next 12 months as fixed-rate customers see their deals come to an end. 

Joanne Leek from Suffolk Building Society

Joanne Leek, from Suffolk Building Society, urged people experiencing difficulty to speak to their mortgage lender - Credit: Simply C Photography/Cherry Beesley

Joanne Leek, from Suffolk Building Society, urged people who are experiencing financial difficulties to speak to their lender. 

She said: "People on fixed-rate mortgages won't see any impact now but when their fixed-rated product period comes to an end, that's when they will be at the mercy of the current rates. 

"So what we do say is people should consider their options carefully and do what's right for their individual circumstances, such as speaking to an independent mortgage broker, who will be able to assess the person's situation and the current products available. 

"People who are already in a variable rate mortgage and might be seeing their payments increase, if they are experiencing any financial difficulty then they should speak to their lender as soon as possible. 

"I will say that's not just limited to mortgages, any credit commitments that people have, if they feel they're going to have difficulty meeting any of their repayments, they should speak to their lender or credit provider as soon as possible." 

Ms Leek stressed the importance of communicating with lenders over any potential problems. 

"Certainly in our case, we want to work with our borrowers and help them. The earlier we know about it, the earlier we can help and can assess their circumstances and offer some potential solutions," she added. 

"It's really important not to bury your head in the sand if you think you are going to have trouble paying your credit commitments."