"People have already reached breaking point"

The cost-of-living crisis has had a major impact on the mortgage market with rates continuing to worsen for homeowners.

They are now paying as much as 21.5% more, or the equivalent of £162.83 per month, when compared to those that locked in when rates were at their lowest point last year, data from Revolution Brokers has shown.

“Given the rising cost-of-living and increasing interest rates coupled with wages that are struggling to keep up, some people are beginning to struggle to meet their monthly payments,” according to Karen Noye (pictured), mortgage expert at Quilter.

Noye explained that cheap mortgage rates have quickly disappeared from lenders’ shelves, leaving many paying considerably more than those that locked in when rates were at their lowest. She added that some people have already reached breaking point and are finding it difficult to keep up with their repayments alongside the rising costs of food, fuel and energy bills.

“With the energy price cap set to rise again in October, there will no doubt be more people left struggling,” Noye continued.

The government has, in the past, intervened to help those struggling to make their mortgage repayments, as was seen with the introduction of a mortgage holiday during the pandemic which provided a much-needed lifeline for many. Should the current situation continue to deteriorate, Noye believes there could be a similar intervention.

Read more: Stamp duty holiday expected to save homebuyers £1.5bn by March

“However, should another mortgage holiday be introduced, it should only be used by those who simply cannot meet repayments due to the crisis and need the breathing space to stabilise their finances, as delaying also extends the borrowing period which is generally not a good idea unless essential,” she said.

Ultimately, Noye believes borrowers who are struggling should be in touch with their mortgage lender. Regardless of whether the government were to introduce a mortgage holiday, Noye believes many lenders offer forbearance which can allow an individual to pause or reduce their payments for a limited time.

“While this should be a last resort, it may be an option should the need arise,” she added.

Additionally, Noye outlined that many lenders have already said that they are introducing other measures to help their customers, with Nationwide announcing its cost-of-living helpline which aims to help those struggling to access support quickly.

Read more: Nationwide to offer cost-of-living support for members

What are the options?

For those borrowers struggling to make their repayments, Noye outlined that there are options they could explore.

She explained that if a borrower is currently on a tracker mortgage, their repayments are likely to continue rising if the Bank of England increases its base rate further as expected over the coming months. “If this is the case, it may be worth considering switching to a fixed rate mortgage to help protect themselves from additional rate rises, particularly if they can do so without incurring an early repayment charge,” Noye said.

While the rates on offer are not as low as they once were, she believes it could still pay to lock in now.

Additionally, Noye said it is a good idea to take stock of household expenditure and make cutbacks where possible.

“A good place to start would be to look at whether there are any TV subscriptions or other memberships that can be stopped - shop around to see if there are cheaper options to reduce mobile phone bills and look at ways to reduce food shopping bills as well as avoiding food waste,” she said.

If unsecured debts are an issue, Noye believes it could be worthwhile to look at ways to reduce them, starting with those with the highest interest as they will cause a significant drag on finances.

Meanwhile, she outlined that those who are struggling should seek professional financial advice to help them manage their finances and find the best solutions for their circumstances.

“There are a number of government-backed services available such as Money Helper, or a charity such as StepChange or Citizens Advice, which can offer free support,” she concluded.