Although nobody has a crystal ball, everybody can read numbers or, more accurately, ratios. Currently, interest rates are at historic lows while inflation is well above the government’s 2% target. This means that mortgage holders should be making absolutely sure that they’re on the best deal for them and may wish to give particular consideration to fixed-rate mortgages.
If you can remortgage, look at your options
If you’re coming to the end of your introductory deal, then you should definitely be researching your options. This is advisable at the best of times. Now, it’s arguably vital. Currently, your big decision is whether or not you’re happy to take your chances with a variable-rate mortgage.
Including variable-rate mortgages in your search criteria will, of course, give you a greater selection of products than just sticking to fixed-rate deals. On the other hand, if you do opt for a variable-rate mortgage, you have to accept the risk of being locked into a deal while interest rates go up, possibly indefinitely.
If you go for a fixed-rate deal, you run the risk of lenders pricing in the risk of an interest-rate increase which never materializes. This could leave you paying more than you would have done on a variable-rate mortgage. On the other hand, even if this did happen, you would still have the stability of knowing what you were going to be paying from one month to the next.
Whatever you do, you almost certainly want to avoid finding yourself on your lender’s standard variable rate. This is highly unlikely to be the best deal available to you. If you do wind up on it, then it should only be as a short-term option. For example, if you aren’t sure what your plans are, you may wish to hold off remortgaging until you have clarity.
If you can’t remortgage see what you can do
If you’re still within a lock-in period, then you may find that buying your way out of the lock-in just isn’t financially viable. You could try asking your current lender if they will switch you to another deal. If they say no, then just make a note to start the remortgaging process as soon as you can. In the meantime, see what you can do to protect yourself if interest rates do rise.
For example, could you make overpayments? If not, could you put money aside so that you have extra cash in hand if your monthly mortgage payments do rise? If you don’t have the money is there any way for you to get it? For example, could you take on extra work, start a side hustle or monetize your home in some way, such as by using the “rent-a-room” scheme?
Also, do everything you can to polish your credit record until it gleams. This isn’t the be-all-and-end-all of mortgage applications. It is, however, most certainly one of the key factors lenders will consider when assessing your application.
Review your insurance
Although the UK economy is currently heading back towards normality, there’s never any harm in being on the safe side. In other words, consider what would happen if you were unable to work for any reason, even if only temporarily. Your first resort might be cash savings but these will only take you so far.
With that in mind, it might be a good idea to look at supplementing cash savings with at least some form of insurance. If you’re in paid employment, you should certainly look at what your employer offers. This may be sufficient, but then again it may not. If it isn’t then, as an employee, you could look at income protection insurance.
Regardless of your employment status, you might (also) want to consider income protection insurance and/or critical illness cover. These could both help to cover your mortgage if you went through a financial rough patch.
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