Month: June 2023

It’s not a great time for mortgage holders. The Bank of England raised the base rate by 0.5 percentage points to 5 per cent last week, and the core inflation figures recently published suggest the economic troubles aren’t going away quickly.

So if you’re feeling worried about your mortgage right now, you’re not alone. There are things that can be done, however, so here are five practical suggestions to help ease the panic.

You can extend your mortgage term

If you extend your mortgage term, it will lower your monthly repayments. The downside of this strategy is that you will have a mortgage to pay for a longer period of time, and that could cost you more in interest.

On the other hand, if interest rates come down at any point over the next few years, you may be able to remortgage onto a lower rate at that point. Potentially, if your financial circumstances have improved sufficiently by then, you could look at reducing your term back down again.

You can book a new rate six months ahead

If your current cheap deal is coming to an end this year and you are worried about rates rising further, you can lock in a new fixed rate deal now. This is because most mortgage deals can be booked six months in advance.

The good news is that, if between now and your current deal coming to an end rates do start to come down, you can change your mind about which deal you want to remortgage to. So you’ll get peace of mind now, knowing you’ve got a fixed rate that protects you against further rises. But equally, if rates do start to come down, you can look to change the product you’ve booked if a better deal does appear.

You can shop around for the cheapest deal

Although the average two-year fixed rate is 6.15 per cent and the average five-year fixed rate is 5.79 per cent, you may be able to find a market-leading fixed rate for 5 per cent or less, if you speak to a broker. This is particularly the case if your loan-to-value (LTV) – which is essentially the proportion of the overall cost of the property that the bank is lending on – is 60 per cent or less.

Even if your LTV was high (for example 90 per cent, meaning your deposit is 10 per cent) the last time you borrowed against your home, recent increases in house prices could mean that you will qualify for a more competitive deal when you come to remortgage.

It is particularly important to shop around for a cheaper deal if you have moved on to your lender’s standard variable rate (SVR), as most SVRs are usually at least two percentage points higher than the best buys available on the market.

You can plan ahead – and prepare

If you are still on a super low fixed rate, make the most of it either by putting money aside each month or possibly even overpaying the mortgage. That will put you in a better position when you do come to switch. Getting into the habit of allocating more of your monthly spend to your mortgage now will mean you do not have such a big shock when your current deal ends, and that will give you peace of mind. And if you put that money in a competitive savings account, you might even earn more interest on it than you’re paying on your mortgage.

You can ask to temporarily switch to interest-only

One of the easiest ways to cut your monthly mortgage payments is to ask your lender if you can temporarily switch from a repayment mortgage to an interest-only mortgage for six to 12 months. This strategy will cost you more in the end – and as you are no longer paying off your debt, you will move no closer to owning your home. But, as a temporary measure, it can be helpful as a way of significantly reducing your monthly outgoings.

Such a strategy should be considered a last resort. You will end up paying more in the end, but that may be better than struggling and bankrupting yourself now.

Lenders will typically only allow you to do this switch on a temporary basis, for example for six to 12 months. During this period, you may be able to increase your income, for example by getting a higher paid job, or you may decide to sell up and downsize so that you can afford to switch back to a repayment mortgage on your home. The good thing is, taking this step won’t affect your credit file, as long as you make your payments on time.

Source: Donna Ferguson of inews 25^th June 2023

 

The Government have set forward their Renters Reform Bill, which is now making its way through the Parliamentary process, with aims to be law by the end of 2023.

We’ve summarised the key proposals that will debated in the House of Lords and House of Commons. Continue reading to stay up to date.

Tenancy Reform 

• Fixed-term tenancies are ending and being replaced by periodic tenancies that don’t have an end date. Tenants will be able to leave the tenancy by giving two months’ notice
• Rent increases limited to one increase per year, a form must be completed by the landlord and served to the tenant with two months’ notice

End Of No-Fault Evictions 

• Under the new legislation, section 21 ‘no fault evictions’ will be abolished
• Landlords will only be able to evict tenants under certain circumstances under section 8 grounds

Private Rented Sector Ombudsman Portal 

• This independent body will oversee dispute resolutions, providing a fair and impartial platform for tenants and landlords alike
• Membership for landlords will be mandatory

Private Rental Property Portal  

• Landlords will be legally required to register themselves and their properties on a new property portal, created to help facilitate communications with tenants

Renting With Pets  

• Tenants will now have a legal right to request permission to keep pets in their rented homes. Landlords must consider these requests and cannot unreasonably refuse them.​​​​​​

Additional Measures 

• No blanket bans on renting to benefit claimants or families with children allowed

Applying the Decent Homes Standard to the PRS for the first time, ensuring that rented properties meet minimum quality requirements.

What’s Next?

We’ll keep you informed as the Bill makes its way through Parliament.

If you find that landlords require extra support, there is additional information on the government website and general PRS information on our blog.

Source: Paragon 30^th May 2023