Property owners who are finding it increasingly difficult to keep up with mortgage payments due to the high inflation rates are being actively encouraged to remortgage in order to bring down monthly mortgage payments.
According to a report released by the Joseph Rowntree Foundation, the rising price of energy is set to hit the poorest hardest, with households looking to spend around 18% of their income on gas and electricity after April this year.
To add even more stress to families, the energy price cap set is about to rise in conjunction with an increase in national insurance contributions. With inflation at a thirty-year high, services and goods are going to become increasingly expensive as we move through 2022.
According to L&C Mortgages, property owners will find that their mortgage repayments will be around seven times that of their energy bills, and as such, they are encouraging homeowners to look at changing their mortgage in order to reduce monthly outgoings.
David Hollingworth from L&C Mortgages commented: “It’s easy to focus on the costs that are climbing rapidly, like energy bills, and many homeowners will feel the pinch due to the price cap rise in April when council tax and national insurance changes will also begin to bite.
“Many of these elements are out of our control, but the mortgage is often a substantially higher outgoing and could offer a silver lining for homeowners.
“Fixed-rate mortgages offer a chance to save thousands for those that have drifted onto a lender’s standard variable rate.
“Cutting the biggest household bill could offer savings that mitigate the inevitable increase in other costs but also give the chance to shelter payments from any further interest rate rises.”
An analysis by L&C Mortgages shows families have an average monthly mortgage cost of around £900 and average energy costs of £118. Energy costs are expected to rise by approximately 50% over the coming months, and it is suggested that reducing monthly mortgage payments could significantly help in keeping monthly household outgoings down.
There has already been a hike in mortgage interest rates in response to rising inflation. Some lenders have passed the base rate increase on to SVR (standard variable rate) clients. This means that should a homeowner decide to remortgage from an SVR mortgage with a rate of 3.91% to a fixed mortgage rate of 1.36%, they could potentially save themselves around £2,200 per annum. A decrease of as little as 0.65% on mortgage interest could completely offset the effect of rising gas and electricity bills.
With inflation, energy costs, and mortgage rate increases guaranteed to put most families in the UK under immense financial pressure, changing to a low fixed-rate mortgage could be the perfect solution to alleviating some rising monthly costs.