FATHER-OF-TWO James Poulter has been forced to slash his household spending to keep up with his mortgage payments after his interest rate soared.
The 37-year-old, bought his three-bedroom home in Lingfield, Surrey, in 2021 and took out a £225,000 mortgage with an interest rate of 1.8%.
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But when he remortgaged a year ago in April his rate more than doubled to 4.5% – adding around £600 to his monthly bills.
To make sure they don’t end up financially hit, the young family was forced to make cutbacks such as selling one of their two cars.
James, who works in AI, said: “Thankfully we were in a position where we could afford to make that work for us but it certainly has had a hit.
“We’ve decided to go from having two cars back down to just one to save some money.
“We’ve also been a lot more conscientious about going away and have not been on any big family holidays since.”
James is not the only homeowner to be surprised by rising mortgage rates.
More than 1.8 million homeowners need to remortgage this year, according to UK Finance.
Many will have taken out mortgages when interest rates were low and will now need to secure a new deal at much higher rates.
As a result, their bills could soar by hundreds of pounds.
James said: “I don’t think anyone assumed that the rates would suddenly basically double.
“Even when you hear that rates are going up you don’t think it affects you if you are on a fixed deal until it shows up in your pocket.”
Now mortgage rates have thrown another spanner in the works for the young family as they are in the process of moving house.
James has made an offer on a three-and-a-half bedroom home in Kingston upon Thames, south-west London as he wants to be closer to friends and family.
But he cannot move as mortgage rates have put pressure on his property chain and have forced it to collapse twice.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
A property chain is when a group of buyers and sellers are linked together because their purchase or sale depends on the others.
If you are in a chain it can mean that it takes you longer to buy a house.
James’ chain collapsed the first time because one of the buyers lost their job so could no longer move.
The second was because another buyer could not get the financing they needed to buy a property in the chain.
As a result, James has been trying to sell his property for almost a year.
He took out a £500,000 mortgage with Atom Bank in May last year but it expired as his sale dragged on for too long.
He was then forced to take out another mortgage with Santander in December.
James said: “Mortgage rates have made it more difficult. When buying a property you are constantly worried that your current sale is going to fall through.
“Meanwhile, mortgage offers only last around six months. So then you have to go back to the lender but rates may have changed.”
James put his home on the market in March last year.
He accepted the first offer on his home in May 2024 but the buyer was forced to pull out.
James accepted another offer on his property last week.
The young father said the whole process has been “really frustrating”.
He explains: “It’s been more than six months since we’ve been trying to sell. Our current property is under offer so we pay it stays that way.”
Get help with your mortgage
If you are worried about keeping up with your mortgage payments then you should contact your lender.
The sooner you act the better as you are likely to have more options if you have not yet missed a payment.
The Government has launched a ‘Mortgage Charter’ to help borrowers who are struggling with higher interest rates.
It allows lenders to offer ‘forbearance’ in the form of flexible, short-term support.
Asking your lender for this support will not impact your credit score.
If you are worried about keeping up with your mortgage repayments but have not yet missed a payment then there are three main options you can ask your lender about:
- Lengthening the term of your mortgage and switching back to the original term within six months.
- Swapping to an interest-only repayment for six months.
- Switching to alternative payment arrangements, such as a mortgage payment holiday.
If you need to continue these measures past the six-month point then they may negatively affect your credit file.
Make a budget before you speak to your lender to help you decide what repayments you can afford.
If you have missed a payment and are in mortgage arrears then you should contact a debt advice service for free and confidential information.
Another option is to check if you have insurance cover.
Certain types of cover can help with your mortgage repayments if your income drops because of redundancy, accident or sickness.
You may have taken it out with your mortgage.
Check through your mortgage paperwork and ask your lender or mortgage broker.
There are five main types of insurance you may have:
- Mortgage payment protection insurance – This insurance promises to make your mortgage repayments for you if you cannot work due to an accident, sickness and sometimes unemployment. Normally this is because of redundancy.
- Accident, sickness and unemployment policies – These policies pay out a pre-agreed amount based on your earnings for up to two years.
- Income protection insurance – This pays out a pre-agreed amount based on your income in the event of an accident or sickness until you return to work or retire.
- Critical illness cover – This cover supports you financially if you are diagnosed with a condition which is included in the policy. The tax-free, one-off payment helps to pay for your treatment, mortgage, rent or changes to your home should you need it.
- Life insurance – This is designed to reassure you that your dependents will be financially looked after in the event of your death. You decide how it is paid out and whether it will cover specific payments, such as mortgage or rent.
If you are a homeowner or have bought a shared ownership property then you may be able to get help towards interest payments on:
- Your mortgage
- Loans you have taken out for certain repairs and improvements to your home
The help is called Support for Mortgage Interest.
It usually helps to pay the interest on up to £200,000 of your loan or mortgage.
It is paid as a loan which must be repaid with interest when you sell or transfer ownership of your home.
You may be able to transfer the loan if you are buying a new home.
To get the support you must be in receipt of a qualifying benefit. These include:
- Income Support
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Universal Credit
- Pension Credit
There is no guarantee that you will get the support for a mortgage or loan you take out.
You cannot use the support to help you pay anything towards insurance policies you have or missed mortgage payments.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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