The rising cost of borrowing is impacting millions of UK homeowners, with many facing higher mortgage payments this year. Several major lenders have already increased their fixed-rate mortgage prices, and others are expected to follow suit as government borrowing costs rise and uncertainty looms over the UK economy. Over 1.8 million borrowers are due to remortgage in 2024, leaving them vulnerable to these escalating rates. Experts advise those whose fixed-rate deals are expiring soon to start exploring new offers up to six months in advance. This allows homeowners to secure a rate and gain a clear understanding of future payments, with the option to switch to a better deal if rates fall before their current deal expires. Seeking professional advice can help navigate the complex mortgage landscape, considering not just interest rates but also associated fees.
The decision between a fixed-rate and variable-rate mortgage is crucial in the current climate. While the temptation might be to revert to the lender’s Standard Variable Rate (SVR) after a fixed-term deal ends, this is often the most expensive option. SVRs typically carry significantly higher interest rates than fixed deals, potentially negating any savings from future rate drops. A tracker mortgage, which fluctuates with the Bank of England base rate, can be a more cost-effective alternative, especially for those who anticipate interest rates stabilizing or declining. However, trackers carry an element of risk, as rates could rise further. Fixed-rate mortgages offer stability and predictability, shielding borrowers from future rate hikes, but can be less flexible and may mean missing out on potential savings if rates fall. The best choice depends on individual circumstances and risk tolerance.
Overpaying on a mortgage can be a strategic move for those with spare cash, especially if currently on a low fixed-rate deal and anticipating higher rates upon remortgaging. Overpayments reduce the principal balance, leading to lower interest accrual over the loan term. While a lump-sum overpayment can significantly lower future monthly repayments, it’s vital to maintain a financial safety net for unexpected expenses. Most lenders allow overpayments of up to 10% of the outstanding balance annually without penalty.
Prospective homebuyers face additional challenges in this rising interest rate environment. Lenders may be less willing to offer large loans, and affordability assessments will be stricter, considering the potential for further rate increases. This means buyers may not be able to borrow as much as they could have previously. Open communication with lenders is crucial to understand the implications for borrowing capacity.
First-time buyers face a particularly complex situation. While some areas are experiencing easing house prices and low-deposit mortgage schemes are available, the upcoming changes to stamp duty thresholds will impact those purchasing properties above £300,000. From April 2024, first-time buyers will no longer benefit from zero stamp duty on properties between £300,000 and £425,000, facing a 5% rate on this portion. Navigating these changes requires careful budgeting and understanding the available schemes and low-deposit mortgages. Expert advice from a mortgage broker can be invaluable in finding the best deals and navigating the market.
Beyond mortgages, consumers are also facing challenges with telecommunications providers. Ofcom is proposing a reduction in the time it takes to escalate complaints to the ombudsman, from eight weeks to six. This aims to provide quicker resolution and compensation for customers experiencing service issues. The proposal is currently under consultation, with a final decision expected by the end of summer 2024. Consumers should first attempt to resolve issues directly with their provider before escalating to the ombudsman. In separate consumer news, mattress brand Emma Sleep is facing criticism for delivery delays, missing orders, and poor customer service. Customers are advised to explore chargeback options with their banks or credit card providers if they have not received their orders and paid by card, citing a breach of contract under the Consumer Rights Act 2015.
