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Mortgage restructuring

Journalist: Melissa Lawford, The Telegraph

ended 03. August 2023

How many requests are you getting from existing homeowners who want to restructure their mortgages to reduce their payments, as their fixed rate deals expire and they move onto higher rates? How many people are asking to move to interest-only? How many people are trying to extend their mortgage terms (and how much are they extending them by)? Who are the people who are doing this - is it just people who bought during the pandemic/family homes/particular areas? Thanks so much

10 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Most homeowners who are due to remortgage can absorb some of the increase in payments having already reassessed their monthly finances and cutting out or reducing luxuries. However, those that maxed themselves out on a more recent house purchase, coming up for their first remortgage are struggling to balance the books. These clients are generally, where possible, looking to increase the mortgage term by 5 years on average to help reduce the impact on the monthly payment hike. We have not seen many ask about interest only. Of course, we fully explain the impact of paying more interest over a longer term, but for many the short-term monthly budget need supersedes the long-term savings.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
People from all walks of life are more frequently looking to restructure debts than before, and in doing so, reducing their overall income contribution towards all debt. Higher-income earners appear to be more comfortable with higher unsecured debt levels. Despite the higher mortgage rates available in the market, debt restructuring often results in a reduction in overall household expenditure, providing a practical buffer to the increased mortgage costs.

Interest only is not commonly requested or recommended. Anyone looking to restructure debt and go on to an interest only basis will find their applications declined, as this is a no-no in the world of mortgages.

Term extensions are another way consumers can reduce their payments, however, you would need to extend the mortgage term by 8-10 years to see any significant payment benefit.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
We're seeing a high proportion of people wanting to restructure their mortgages. We've helped a number of our clients to make a "strategic overpayment" to get their loan-to-value down to the next threshold and secure a better interest rate. At the same time, where possible, many are opting to extend the term of their mortgage to around age 70 to mimimise the increase in monthly payments when remortgaging onto a higher rate.
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Elliott Culley
Director at Switch Mortgage Finance
When quoting rates starting with either a 5 or a 6, a common response we get is too ask about increasing the term. Most are seeing this as a temporary measure hoping rates will improve as forecasted in a couple of years time. We are mainly seeing this for clients with a mortgage in excess of £150,000, with most looking to increase by about 3-5 years to try and payments a little bit more manageable.
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Ashley Thomas
Director at Magni Finance
We have seen a large increase in people considering increasing their term or changing to interest only to reduce their costs. This is sensible for some as it is better to be able to afford the payments. Although the payments are lower, you need to be aware that you would pay more interest extending the term over a longer period and with interest only you are not paying down the debt. You need to have a good repayment strategy for interest only and this is generally only available to higher earners.
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Joe Stallard
Director and Advisor at House and Holiday Home Mortgages
We’ve not seen much desire for clients to move onto interest only, but we have come across a number of borrowers seeking to extend their mortgage terms. This tends to be more likely when the clients are young families, especially those with younger children where childcare costs are a big part of the equation. Careful discussions are the key factor here. We spend a lot of time and energy making sure they’re clear about the impact of making a decision like this, and the increased interest they’ll have to pay over the course of the loan by having the mortgage in place for longer.
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Rob Gill
Managing Director at Altura Mortgage Finance
While remortgage borrowers increasing the term in their mortgage has been relatively common for a while, driven by increasing expected retirement ages, shifting to interest only has gone from rare to commonplace in the space of a few short months. Such borrowers tend to be homeowners with good levels of equity who wish to prioritise their current lifestyle over paying off their mortgage for the time being. Sensible borrowers who opted for shorter terms when interest rates were low are now in a good position to extend their term while rates are relatively high/
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Looking at extending repayment terms is a conversation I have with all clients when we are reviewing their mortgage deals currently, roughly speaking about 50% will choose to extend the repayment term, whereas the other 50% are choosing to accept the increased mortgage payments and keep the repayment term where it is. At this point, I haven't had to go down the route of looking at moving all, or even just some, of the mortgage to an interest-only basis with my clients.
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Gareth Davies
Director at South Coast Mortgage Services
All remortgage conversations right now involve discussions around restructuring a client's mortgage. Whether that is a term extension or a move to interest-only. Many people are moving from rates starting with a 1, to those starting with a 5 or 6, so they must be made aware of all the options available to them moving forward. Very few can switch to interest-only, and for many it's not something we would advise unless essential. Term extensions are more popular to accommodate the higher interest rates, with the aim being to review again if the market improves in the future.
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Ben Tadd
Director at Lucra Mortgages
More and more remortgage customers are now asking about the possibility of restructuring their existing mortgages to help reduce their payments when their current fixed-rate deals end. The majority of clients now more than ever are asking the question about whether they can switch to interest only. With lending criteria being quite restrictive, eligibility for an interest-only mortgage, often means this isn't a viable option, and so the alternative is to increase the term to reduce payments down. Of those electing to increase the term, this is more often than not up to the maximum possible, usually 35 years. With the intention of reducing the term when rates are lower however, comes a risk that people will settle into their new payments over a longer period and can not afford to drop the term back down, meaning having to pay much more interest over a longer period, and of course also meaning they may have to work longer and retire at a later age too, as a result.