They are reminded to seek mortgage advice first
Amid rising mortgage costs, homeowners are starting to consider options such as downsizing and renting out, according to research from The Mortgage Lender (TML).
A survey of 2,000 UK adults revealed that 10% of homeowners are downsizing in order to reduce costs, while 20% said they are thinking about it. Some 24% are either decided on, or thinking about, selling their homes completely and going back to renting for the time being to avoid increasing costs.
Taking in lodgers is another route borrowers are considering to bring in additional funds, with 7% saying they have already done this, 10% stating they will accept lodgers in the future, and another 16% considering it.
In addition, 45% of borrowers have revealed that they either have or are considering paying an early repayment charge (ERC) on their mortgage deal in order to fix to a reduced rate. Of this, 7% of borrowers said they have already paid an ERC to get a fixed mortgage deal to mitigate a rise in mortgage costs.
Previous research from TML found that half of homeowners with a fixed, tracker, or discount mortgage are on deals that need to be renewed within the next two years. Around 25% of those who are expecting their mortgage costs to go up believe it will increase by an average extra cost of £441 a month.
Almost one in five, or 19%, meanwhile, revealed that they are already cutting back on spending in order to save for or pay increased costs. A further 27% said they will do this, and 30% are considering doing so.
Others are also looking into alternatives to boost their income to afford rising costs. One in 10, or 10%, of homeowners said they have taken on extra work to afford their mortgage costs, with a further 18% planning to do so and 29% considering it.
TML, however, reminded homeowners that each action must be carefully considered before making a decision on what to do with their property.
For those who are considering selling their property and going back to renting, TML said it is important that homeowners speak to an adviser or broker to help assess whether it is the best option for them financially as tenants also facing rent rises.
Those who are taking in lodgers must also factor in important legal considerations before becoming a resident landlord. For example, mortgage borrowers may need to check with their lenders, and it could impact other benefits and tax credits.
Borrowers who are trying to get a fixed mortgage deal are also warned that they could be fixing on to a higher rate than necessary as mortgage rates are predicted to slowly come down in the next few years.
TML’s research has shown that some borrowers are already looking for advice before they make any decision, with 13% saying they have already spoken to a mortgage broker to find the best possible deal. Over a quarter, or 27%, said they will be seeking advice, and 25% stated they will consider it.
“It can’t be denied that the cost-of-living and rising costs are starting to bite, so it’s not surprising that borrowers are looking for ways to save their money,” Steve Griffiths (pictured), head of sales at The Mortgage Lender, commented. “What’s vital is that they seek advice from a professional before making any changes.
“Encouragingly, we are seeing many people speaking to their brokers or planning to do so. Brokers play a pivotal role in supporting consumers to make one of the biggest financial decisions in their lives and can help navigate the market to find the best possible deals that suit individual circumstances and factor in true costs.”
