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Mortgages during the cost of living crisis What is the cost of living crisis? The cost of living in the UK in 2022 is rising dramatically! Rising inflation and proposed tax increases will hit consumers budgets. With costs increasing and wages not matching this will cause problems for many people. Significant rises in the cost of living are also important to first time home buyers and those looking to move or remortgage, as it will mean changes to their ability to afford a mortgage. In some cases your mortgage payments may not have risen a lot, but combined with the other cost of living increases and lack of wage increases this can put a strain on finances. What is an affordability assessment Whenever you apply for a mortgage an affordability assessment is completed by the lender, this is a series of checks that the mortgage lender carries our to ensure that you can afford the mortgage you intend to take out. Lenders are tightening their lending criteria to reflect increasing costs, which has result in a reduction in the number of loans on offer. What does this mean for my application? When a lender assess a buyers income they will need to confirm that the borrower’s income exceeds their outgoings. With high inflation and tax rises, this means that borrowers will be able to afford less, which will affect the amount they can borrow. If you can increase your deposit will help to lower the amount borrowed and your monthly costs. If you are a first time buyer you may be able to boost your deposit with the Help To Buy Scheme but this is due to be phased soon. For others it means finding other ways of trying to boost your deposit, possibly with the help of parents. Remortgaging? If you already have a mortgage you may wish to consider taking advice on whether a remortgage will help you save move and give you the reassurance of a fixed rate in these uncertain times. If the new monthly costs are increasing beyond your means you could consider extending your mortgage term, or switching to an interest only loan, however you should discuss these with your advisor to understand the long term implications. Houseing Market The impact of the cost-of-living crises will more than likely see reduced activity in the housing market as people delay making spending decisions. Less disposable income also means that it will take longer for first time buyers to save for their deposits. Do I need a broker / advisor? In the current climate mortgage lenders are constantly changing rates and products, with some products only lasting a few days. So it makes getting good quality, unbiased, professional mortgage advice key to getting the best deal. If you are coming to the end of your mortgage deal, ideally you should start looking around three months before the term ends. What happens if my circumstances change If you circumstances change your mortgage broker is there to review your options, you can always get in touch with them if you plan to move or need to re-mortgage. Your broker will also get in touch in advance of a mortgage deal ending to review your circumstances and see if they can arrange a better deal for you.
