The cost of living is rising rapidly, which means we are all facing a financial squeeze.
But getting a mortgage graded can help you save thousands of pounds and weather the cost of living crisis.
Soaring inflation is currently at a whopping 5.4% and rumors are circulating that another rate hike is under control.
At the same time, wages have fallen with average wage growth recorded at just 4.2% – well below inflation.
That means as things get more expensive, our take-home wages can’t keep up and we struggle to cover the same things we did a few months ago.
Inflation causes all sorts of trouble for the average Brit, and raising interest rates could send the cost of mortgages, loans and credit cards soaring as well.
“The immediate effect of increased inflation is that people will be able to borrow less when they apply for a mortgage,” said Miles Robinson, head of mortgages at Trussle.
“Since the financial crisis, lenders have taken the cost of living into account when assessing a buyer’s ability to repay their mortgage each month, and this number is tied to inflation.
“As such, if a homeowner’s exit goes up by £3,000 due to inflation, they can borrow £15,000 less on a mortgage.”
This issue can also affect any buyer with an existing “mortgage in principle” who may find that they are able to borrow less than they were initially told because of the measures. affordability is related to inflation.
The good news is that rising inflation won’t immediately affect your monthly mortgage payment. However, if the Bank of England raises interest rates, it will affect households currently using the Standard Variable Rate (SVR).
“Your mortgage payment will increase depending on the rate increase, but the recent increase to 0.25% in November could have added up to £324.48 to the mortgage,” says Robinson. average annual mortgage.”
Fortunately, there are things you can do to protect your finances from inflation.
For most people, their mortgage is their biggest monthly outbound deposit, and so it’s important to make sure that rising interest rates don’t make it insolvent.
The upside to this is that getting a great deal can be one of the best possible ways to beat the added costs.
Below, Trussle’s head of mortgages, Miles Robinson, shares his top tips for using your home and mortgage to stabilize financially and protect yourself from inflation:
Remember you can usually get a full six months mortgage before your deal closes
Our advice is to take advantage of existing deals sooner rather than later.
Previous research by Trussle found people can save an average of £3,500 a year with a mortgage, equivalent to 15 per cent of the average UK salary.
You may have to pay an early repayment fee to your current lender if you have a mortgage.
The 5-year fix could be a very good option in the current climate
With interest rates rising in sight and inflation pumping out at all-time highs, a steady, flat monthly payment could ease anxiety for many.
There are still some great five-year deals on the market, especially with a slightly higher LTV, so committing to paying a little more monthly now could be a big deal if rates and prices activities continued to increase.
The best 5-year fix as of today for an 80% mortgage on the UK median home price is now 1.72% with Natwest. This drops to 1.32% with Barclays if the homeowner has an LTV of 60%.
Are you eligible for a green mortgage?
A green mortgage essentially rewards you for having an energy efficient home by offering you a more favorable rate. Check the condition of your home or any new purchase (A or B on your EPC certificate) as savings can be made here.
Green mortgages can offer lower mortgage rates, mortgage rebates, or additional loans at lower interest rates.
NatWest, Halifax and Barclays offer green mortgages, with NatWest offering reduced interest rates on two- or five-year fixed-rate mortgages, along with rebates.
Investigate partial and partial mortgages
While not suitable for everyone, and lenders will want proof that you can comfortably keep up with your monthly payments, Partial and partial mortgages are offered by some lenders and can be an effective way to reduce your monthly payments.
This is where some loans are repaid and some are just interest. Good brokers can tailor these products to your needs and then make sure you have overpayment terms to allow you to take advantage and pay more as you get more income.
Thinking about overpaying
While rates are low, now might be a good time to start paying that extra monthly or in lump sum, if you can.
Check your criteria as most mortgages allow you to overpay by up to 10% per year and the amount of money that can be saved by doing this regularly is astounding.
Paying just over £50 per month could eliminate almost two years of your mortgage and save you more than £5,000 over its life.
Consider an offset mortgage
This links your savings account to your mortgage and means that lenders will treat any savings you have as mortgage overpayments.
You can still dip into the savings you’ve chosen to offset, but this will affect the interest rate you pay. You will also need to have your savings and mortgage with the same provider.
If you are a first time buyer, try to save as much deposit as possible.
A larger deposit means lower interest rates on mortgages. It will also help you qualify for a mortgage in the first place.
This might be the time to ask Mom & Dad for help – they may have lower interest rates than standard lenders!
This is also completely normal, research has shown that 40% of buyers today need family support to buy their first home.
Ideally, a 20% deposit is a good starting point, but if 25% can be reached there will most likely be a higher interest rate.
Trussle’s best first-time buyer mortgage is a 2-year flat rate at 1.68% from the Principality Building Association.
https://www.thesun.ie/money/8231870/mortgage-expert-save-avoid-rising-inflation/ I’m a Mortgage Expert and Here’s How You Can Save THOUSANDS and Avoid Rising Inflation