MoneyWeek article - Are homeowners prepared for mortgage rate rises?

There is a general acceptance from people, that they are going to be paying more. However, from what we see, there is little or no preparation or calculation of how much interest rates will affect mortgage payments. Affordability remains the biggest challenge, and this is a likely contributor to the continued rise in Product Transfers where a contract variation takes place, with no affordability checked. With rates on the decline now, the expected 5m who have yet to reprice may not experience the same payment shock as those who already have repriced their mortgages albeit their costs will go up. In preparation for impending increases in mortgage costs, we encourage people to look at wider household expenditure, from subscriptions to credit card debts. Debt consolidation is becoming an increasingly popular way of rebalancing household finance to cope better with not only mortgages but the cost of living as a whole.

Borrowers are definitely more in tune with market conditions now, it has taken the best part of 12 months to eventually sink in. Many originally thought they were immune to the issue, it wasn't applicable to their mortgage, but the continued press coverage has helped clients better understand, and that reflects in a greater acceptance of these higher rates. Some borrowers have been putting extra aside in a savings account to get used to higher payments, many have been looking to repay more expensive borrowing such as credit cards, reducing other outgoing to afford the higher mortgage payments. Most understand that the days of cheap mortgage borrowing have now disappeared for a long time.

Most people are aware that mortgage rates have increased over the last 18mths or so unless they have been sleeping. There will be people who will sadly not be in a position to afford their new mortgage payments however, most have had the opportunity to try and adapt their finances before their mortgage product comes to an end. The stress testing has worked on these applicants as majority can pay, the hardest thing is accepting the increased costs in a world where everything has gone up. Consumers should take advice from a good broker to ensure they are looking at all possible avenues and importantly, rates have come down from where they were and long may this continue!

Unfortunately, those seeking to refinance from previously low rates should prepare for higher repayments for some time to come. Fortunately, rates are decreasing, with further reductions anticipated in 2024. However, it is not just homeowners who are feeling the pinch. These rate increases have impacted everyone, including landlords, potentially leading to higher rents for tenants. The low rate interest rate party that lasted from 2008 until early 2022 is well and truly over.