Soaring mortgage interest rates have left some borrowers facing real financial hardship, especially as the extra mortgage repayments come at a time when food, fuel, clothing and energy costs have been rising sharply too.
The Government has asked UK mortgage lenders to offer some temporary respite to struggling mortgage customers, perhaps by switching to interest only payments for a few months or extending the term of their mortgage.
But how much money can these options save a customer each month?
For someone with a £150,000 mortgage on a 25 year term at a rate of 5%, moving from capital and interest repayment to interest only would see monthly repayments cut from £877 per month to £625 per month – as saving of £252 per month. This is good news in the short term as it helps deal with the immediate cash flow issues, but in the longer term it does mean customers will end up paying back more.
Another option is to keep your home loan on a repayment basis but extend the term from 25 years to 40 years as a temporary measure, in the example mentioned above, this will see your mortgage repayments fall from £877 per month to £724 per month – a saving of £153 each month.
If you are concerned about being able to afford your mortgage repayments, please contact your lender without delay – the government has asked that they provide temporary assistance – it is important to stress that even if you have to seek such help – it WILL NOT impact your credit record or credit score.