Why Well be Forced to Remortgage and Go Back to Work

By: Luke Ashworth

Over a quarter of mortgage holders affected by the last base rate rise are financially stretched and are struggling with making their repayments forcing them to either sell or remortgages. Only 12 per cent of people have budgeted for further interest rate increases meaning more than seven million people would be pushed into remortgaging if a rate rise led to their payments increasing by up to ?100 per month.

Most people however, have resigned to the fact that they will have to remortgage if their payments rose by just ?50 per month. Rate rises is of increasing concern as, if it only rose by a half per cent, it would drive an alarming number of people into financial difficulty. Homeowners on a ?150,000 interest-only tracker mortgage face additional costs of ?750 per year, or ?62.50 per month, for every half per cent that interest rates rise.

If we do assume the next rate rise is half a per cent, many borrowers will have seen their mortgage repayments rise by 1.25 per cent over the past 12 months. That is an increase of ?156 a month, or ?1,875 a year. Anyone finding it difficult to make their mortgage repayments already (or who think they might after the next rate rise) should try to remortgage to a better deal. After all, the UK mortgage market is saturated and it wouldn't take long to shop around and find a better offer.

A recent survey by a financial comparison website revealed that just over half (53 per cent) of people with a mortgage were affected by the last base rate rise in January. Of these, 15 per cent are only just coping financially with their current lifestyle while nine per cent are struggling to the extent that the recent increases in mortgage repayments are forcing them to make personal sacrifices. A further one per cent are having to sell or remortgage.

It is alarming that people are still not budgeting for the increased mortgage repayments a further rate rise will bring. With so many saying they will be forced to remortgage if their monthly payments increase it is more alarming that more borrowers have not yet factored this into their offers. Even more staggering is that people who are relying on being able to remortgage if their repayments rise may not be able to afford to do so due to the early redemption charges in place on many products.

Over 11 million UK households are dependent on more than one salary to cover their bills and of the 7.1 million households with dependent children, 3.5 million are reliant on two salaries to maintain an acceptable standard of living. Over half of Brits have less than two month's salary tucked away in savings to cover such a financial emergency. The reliance on two incomes to buy and run the family home means millions of households are effectively doubling the risk of financial hardship should one of bread winners become unable to work due to pregnancy, for example.

The average maternity leave, with full pay, in the UK is just six months or 12 months with half pay. The burden of a mortgage is forcing mothers back into the work place sooner rather than later and is then racking up even more bills such as childcare. The only way to get around this is to buy early and become financially stable before settling down in a home and starting a family. It also goes without saying that saving a little of our take home pay each month is a necessity in preparing for a change in financial situation or a surprise rate rise.

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