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Many households need to brace themselves for a rise in mortgage costs

By the end of 2023, 1.4 million households will see their fixed-rate deals coming to an end with deals automatically being moved over to the lender’s standard variable rate option. The result could be that home owners will see their mortgage repayments increase by an average of £250 per month*.

Why are mortgages so expensive right now?

Back in 2021, the official bank rate was 0.1%* with mortgage rates slightly higher than this. As the bank rate has soared to the current 4%* so has mortgage rates, with households paying more now than they will have done for many years. 

Handy hints if your fixed rate is due to end soon

There are things you can do now to help you prepare for a potential hike in mortgage repayments.

Your contract will have the details of when your existing deal ends and how much you are paying every month. Check what the outstanding balance will be when the deal ends and work out roughly how much your payment will increase by if you were to move over to the standard variable rate. 

The BBC has created a mortgage calculator which could help with this.

https://www.bbc.co.uk/news/business-63474582 

Speaking to a broker can be beneficial as they will be able to provide you with mortgage deals that are not available on the high street. For a fee, they will work on your behalf to research the market and present options that suit your situation. They will also consider the different types of mortgages e.g. fixed rate, variable or tracker and provide advice to help you pick the one that’s right for you.

Read more about our different mortgages HERE  

At Mallory Financial, we live by ‘Our Service Promise’ which provides complete peace of mind that the administration fee will be fully refunded if we are unable to find a successful Decision in Principle. Read more about ‘Our Service Promise’ HERE. 

Depending on your new lender or mortgage broker, you can secure a new mortgage rate three to six months beforehand which would protect you against further rate rises. 

If interest rates were to fall, the opposite would happen and you could be stuck paying more each month. However, there are companies now who will allow you to cancel your deal without paying a fee, as long as the new deal hasn’t already started. 

The difficulty here is that no one can predict the future. This is a when speaking to a mortgage broker could be helpful as they have years of experience and often have access to specialised lenders to help keep costs down.

It would be useful to work out how much your mortgage repayments will increase by so that you can prepare for the potential rise in outgoings. According to the Offfice of National Statistics (ONS), households could see repayments go up by an average of £250/month* which is a lot of extra money to find every month. 

Take time to prepare now. Start putting some spare cash aside and make cutbacks to your monthly outgoings to help with the additional financial burden when it arrives.

Whilst your mortgage rate is lower, consider paying off as much as you can before moving to the higher rate. Again, a mortgage broker can help guide you through this process ensuring you don’t incur additional penalties from the incumbent lender. 

Your home / property may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but will be agreed with you before proceeding.

Sources*
https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/howincreasesinhousingcostsimpacthouseholds/2023-01-09
https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp
https://www.thetimes.co.uk/money-mentor/article/five-things-to-do-if-fixed-rate-mortgage-ending/ 

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