Homeowners struggling to keep their heads above water as the cost of living continues to rise are being urged to consider remortgaging to combat the financial squeeze.
The Joseph Rowntree Foundation warned yesterday rising energy prices were set to hit the poorest families with households on low incomes spending on average 18% after housing costs on energy bills after April.
To add additional strain, the energy price cap has increased and in April National Insurance will also rise. Meanwhile, inflation is currently at a 30-year high and sending the costs of goods and services up.
For homeowners, mortgage payments will amount to at least seven times that of the typical spend on energy bills, according to L&C Mortgages.
As such it is advising homeowners to focus on their mortgage as their first step to combat cost of living squeeze.
David Hollingworth from L&C Mortgages said: “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 gives the chance to shelter payments from any further interest rate rises.”
L&C analysis of 2021 revealed a typical monthly mortgage payment of just under £900, compared with spending on gas and electricity of £112 per month. Energy is expected to rise by 50% as increases take effect but, said L&C, mortgage savings could wipe out those increases.
Mortgage rates are already on the rise as lenders have started to pass the base rate increase through to Standard Variable Rate (SVR) customers. Therefore, remortgaging from an average SVR (3.91%) to a leading fixed rate (1.36%) could save customers over £2,200 per annum on a typical mortgage, David explained.
Indeed, he said, cutting rates by just 0.65% could offset the anticipated £600 annual increase in energy bills.
With more rate rises on the cards in the face of high inflation borrowers can not only make savings now but also fix their rate to avoid further increases in future.
You can find tips on how to lower your energy bill here.
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Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
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