Homeowners urged to ‘take mortgage advice’ now as rates rise and products fall

The uncertainty and worries surrounding mortgages means now is the time for people to seek advice before making ‘rash decisions’, suggests a financial services platform.

Interest rates have been climbing steadily since the start of the year, but it’s been the last few weeks that have really unsettled homeowners and the markets.

The catalyst was last month’s mini budget – in which Chancellor Kwasi Kwarteng announced billions of pounds of unfunded tax cuts – which saw the pound plunge to a record low against the dollar, revised forecasts of interest rate of 6% and withdrawn mortgage products. on the beat.

It took the Bank of England’s intervention to buy bonds and Kwarteng’s U-turn on the removal of the additional 45p rate of income tax to calm and stabilize markets.

Advice from the citizen: Sharp increase in mortgage applications

In the meantime, households already facing the cost-of-living crisis scrambled to escape their current mortgage deals to strike a “cheaper” fixed-rate deal, despite being hit with mortgage fees. prepayment (ERC) worth thousands of pounds.

According to Citizens Advice Scotland, it has seen a 25% increase in views on its webpage on what homeowners can do if they cannot pay their mortgage. Across all of its advice pages relating to mortgage issues, there was a 277% increase in page views in the year to August 2022.

But this data captures the trend before all the recent mortgage turmoil. CAS social justice spokesperson Stephanie Millar said: ‘The huge growth in concerns over mortgage payments predates the most recent interest rate hike and precedes a potential further increase.

“We have seen action from policymakers, but it is clear that more targeted support will be needed for the most vulnerable, and hundreds of thousands of people will look in dread at interest rate decisions in the coming months.”

While Citizens Advice offers free, unbiased and confidential advice, homeowners are also encouraged to speak to a mortgage adviser for help in the current climate.

Mortgage advice is essential

Karen Barrett, CEO and founder of Unbiased – the platform connecting people with financial and mortgage advice – said it was really important for people to seek advice when applying for a mortgage, “especially in the at a time when affordability is being strained due to the rising cost of living”. ”.

She said that although there is a lack of financial advice in the UK, this does not apply to the mortgage market.

About 8% of people seek financial advice from a regulated adviser, while about 90% of mortgage inquiries involve a broker, Unbiased said.

“It’s encouraging because using a broker will help ensure that the mortgage deal chosen is both appropriate and affordable,” Barrett said.

She added that people face big decisions about their mortgage, now or in the future, and for most families, mortgage payments are their biggest monthly expense.

“Choosing the right deal could save thousands of pounds. With interest rates set to continue to rise over the next few months, it’s understandable that many are considering ending their existing deal early and sucking up the ERC.

“But as everyone’s situation is unique, the importance of seeking advice here cannot be stressed enough. Some people may benefit from paying for an ERC and switching to a new agreement, while others may lose out. A mortgage advisor can help you make the decision that’s right for you,” Barrett said.

She added: “We understand that it can be difficult given that things are changing so quickly, but it’s really important to avoid making rash decisions. Taking your time choosing a good deal is better than rushing into it. one that isn’t right for them. But it’s just as important not to bury your head in the sand – now really is the time to seek advice. Mortgage brokers often have access to a wider selection of offers, giving you a better chance of getting the right product for you and your family.