Brokers share what advice they are giving to struggling clients
An estimated half a million mortgage holders coming off fixed rates are in for a financial shock in the run up to Christmas, according to consumer watchdog Which?.
So, what advice are brokers giving these customers? Mortgage Introducer reached out to advisers to find out.
The four ‘P’ rule
Darryl Dhoffer (pictured left), mortgage expert at The Mortgage Expert, is advising affected customers to follow his four ‘P’ rule, ‘prior preparation prevents panic.’
“The main advice from me is to postpone Christmas, and curb your spend, particularly for those that have high mortgage balances that would struggle with the current interest rate arena,” he said.
Dhoffer said customers must act now, and make changes to their spending habits, clear down any unsecured debts, and do not be tempted to take out additional debts.
“Homeowners should talk to a mortgage broker immediately to understand what their new payments will be, as well as if additional help can be offered by way of altering the terms or type of their existing mortgage,” Dhoffer said.
For those that follow these steps, Dhoffer said they might still be able to salvage something of a holiday this Christmas.
Stephen Perkins, managing director at Yellow Brick Mortgages, said Christmas is traditionally a tough time financially for many families as they try to deliver on their children’s expectations.
“With the cost-of-living crisis having squeezed any disposable income, households facing higher mortgage payments, and the continuing high inflation making everything you buy for the festive period more expensive, this year’s celebrations will certainly be bringing financial stress as an unwanted gift,” he said.
As such, Perkins agreed with Dhoffer that the best advice is for customers to sort their new mortgage as early as possible, as this allows plenty of breathing space to work out the most beneficial option based on their individual circumstances.
If the payments do look to be difficult, Perkins advised that customers consider amending the term of the mortgage, or look to ways to lower their monthly outgoings for a time.
Facing the situation head on
Graham Cox (pictured right), founder at Self Employed Mortgage Hub, said his advice to clients is to face the situation head on, particularly if they are concerned about meeting their mortgage payments.
“Speak to an adviser early, up to six months ahead of your current fix expiring, and find out what your new rate is likely to be,” he said.
Cox added that it may be a product transfer with the existing lender is the best bet, rather than remortgaging to a new lender.
Another option, Cox said, are interest-only deals, as well as the potential of extending the mortgage term if necessary.
“If you are still concerned, speak to your current lender for advice; the worst thing to do is bury your head in the sand and fall into mortgage arrears,” he said.
Aaron Strutt, product and communications director at Trinity Financial, said there is no shortage of people coming off super cheap fixes and going on to either high fixed deals, or uncomfortably high standard variable rates.
“The festive period is not going to be amazing for lots of homeowners this year, and we have already seen many struggling,” he said.
Strutt said that if borrowers do take a product transfer or remortgage deal, they need to make sure they switch to cheaper deals with their lender if and when they are available.
Being proactive and facing the tough choices head on is key, which is why Strutt advises customers to speak to an adviser as soon as possible.
What are you advising clients coming off fixed rates ahead of Christmas? Let us know in the comment section below.
