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What can you do if your mortgage payments are going up?

With the mortgage industry looking more and more uncertain, many homeowners will be thinking of ways to try and stop their monthly payments increasing, or looking at how they can pay off their mortgage altogether. In this guide, we look at why your mortgage payments are going up and how equity release plans could help you pay off your mortgage debt and live more comfortably later in life.

Why is my mortgage going up every month?

Mortgage rates are set by the Bank of England every month, and when they increase this rate, the average homeowner’s payments increase. The current base rate is 5% at the time of writing, which is 0.5% more than it was in May 2023. To put this into perspective, the rate in December 2021 was 0.15%. The Bank of England increased the rate in order to fight the rising cost of inflation, and it now sits at a 10-year high. 

Will my mortgage payment go up if rates increase?

Yes, the nature of these rates means that any increase will directly affect homeowners who are currently not on a fixed-rate deal. Mortgage lenders who offer a Standard Variable Rate (SVR) mortgage generally follow the Bank of England’s lead, therefore passing any rate changes on to customers. Those with tracker mortgages may be even worse off as a result of the changes, as there will often be a few percent added on to the Bank of England’s base rate. Homeowners with a fixed rate mortgage will avoid the initial changes to the base rate, but once they come to the end of their fixed rate term, they’ll transfer to an SVR and pay the increased rate going forward.

Is it possible to reduce mortgage payments?

Many mortgage lenders can and will offer certain schemes or payment plans to those who are struggling with their monthly payments, whether this be in the form of a short-term interest-only deal, a payment holiday, or simply a reduced monthly payment. However, the debt is still there and will need to be paid eventually, so it is worth looking at all aspects of your finances before you decide to make changes to your mortgage payments or terms.

How can I stop my mortgage payments going up?

If you are coming to the end of your current deal, you might want to look at shopping around for a better deal and, in particular, looking for a fixed rate offer. Or, you could try and extend your term thereby reducing the monthly payments, however this will increase the amount of interest to be paid overall. Another way to avoid monthly payments at all is to look at ways to pay off your mortgage – such as an equity release plan. A lifetime mortgage, for example, could enable you to repay the mortgage and then have a lifetime mortgage with no monthly payments, interest only payments, or a mixture of both.                 

Can I pay off my mortgage with equity release?

Yes, securing an equity release lifetime mortgage plan can give you the funds you need to pay off your existing mortgage and live more comfortably. If you are a homeowner over the age of 55, you can release the equity that has built up in your home and get a cash lump sum that can be used to pay off your whole mortgage.

You will retain ownership of your home and be able to live there until you pass away or enter long term care, after which your home will be sold to pay back the loan. There are no monthly payments to worry about, with the interest being added to the amount of the loan, or only pay the interest element of the mortgage loan each month which, as mentioned, will be payable only upon your passing or if you enter into long-term care. 

With the mortgage landscape being so uncertain and the cost of living crisis causing stress for so many homeowners, equity release could be a suitable way of maintaining financial independence later in life, without having to move home or struggle with monthly repayments. Speak to one of our advisers today or use our calculator to see how much you could release.