ECU GroupÂ’s chief economist, Neil MacKinnion praised the decision to hold interest rates: “The MPC have done the right thing by keeping interest rates on hold. Previous interest rate hikes seem to be already having some dampening effect on consumer spending and the housing market. However, there is still the risk of a rate hike later in the summer should inflation fail to move closer towards its 2 per cent target.”
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This is echoed by Ian Kernohan, economist at Royal London Asset Management (RLAM), who said: “No move today does not preclude another rate rise over the next couple of months, but at least the MPC would appear to have seen nothing nasty in next weekÂ’s inflation data, which should now fall back as the effect of fuel bill reductions continues to feed through.”
If youÂ’re not convinced remortgaging would help you regain control and associated fees are putting you off, then there are a number of other ways you can generate some extra cash to fend off a further rate hike.
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Extend the term of your mortgage
An extension of your mortgage term is not usually the most adviseable option when faced with a lack of finances, but in certain circumstances it will prove to be beneficial. It allows you to carry on repaying your mortgage, and while you will naturally accrue a larger amount of interest on the total loan, you will be paying back a more manageable sum each month and avoid having to suspend repayments or even defaulting on them.
Switch to interest only
Broadly speaking this is remortgaging, but itÂ’s remortgaging with a twist. Instead of transferring the loan amount to a different lender offering a different deal, you are transforming the way you pay for your home.
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Interest only mortgages have seen a surge in popularity of late as house prices have risen and the interest rates have become less stable. It allows borrowers to reduce their mortgage payments by only paying off the interest they are accruing on the loan. However these mortgages may only be a viable solution for younger homeowners as none of the loan is actually being paid off, a tricky issue for those approaching retirement.
Get rid of store and credit cards
Buy now pay later cards such as these might seem like the ideal quick fix but they charge massively high rates of interest, most between 20 and 30 per cent.
Paying these off or switching all of the debts onto one 0 per cent card can free up the extra money needed to put towards your mortgage repayments.
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Giving up smoking
This might seem like a blip on the horizon when you think about how much you owe on your mortgage, but a 20-a-day smoker can save up to £40 each week by quitting – more than enough to cover the increase in your mortgage repayments. Add this onto the fact that the smoking ban comes into effect in less than three weeks and you’ll be laughing all the way to the bank.
No matter how stressful remortgaging might seem, if your mortgage is a large one then the more likely you are to save by switching to a better deal. The more you are borrowing, the more interest you are paying, so even a 0.3 per cent switch could save you hundreds.
It is important to remember that last decade has been great for mortgage deals and for product development, so if youÂ’ve had your mortgage for a decade there is a very strong possibility thereÂ’s something better out there, especially if you are an older borrower. Plus itÂ’s extremely likely your property has doubled in value. However remember remortgaging is not instantaneous and will take around three months to complete.
Find out all of the associated fees and charges before you enter into anything, and don’t be seduced by attractive headline rates when there can be some nasty tie-ins lurking under the surface. The arrangement/booking fees can rage anywhere from £60 to thousands of pounds, while some lenders will instead opt to charge a percentage of the loan.
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The most important part of remortgaging is the timing, which if done correctly will mean you always avoid defaulting onto the lenderÂ’s standard variable rate (SVR).
However if the prospect of switching every two years fills you with dread, you can always go for one of the new lifetime rates. Melanie Bien, associate director of Savills Private Finance, said: “These are becoming more and more popular, with lenders like Abbey, Direct Line and The Woolwich offering them.”
“Of course your repayments will still be subject to change because they tend to track the Bank of England: if that goes up, so do payments, but most of the rates are pretty low to start with.”
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