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Coming off a five year fixed rate mortgage? Here’s how to navigate the increased interest rates.

Last updated: July 5, 2023

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So, the time has come to bid farewell to your trusty 5-year fixed mortgage. As you prepare to embark on a new financial chapter, there’s a lingering worry about the potential surge in interest rates. After all, even a modest increase can have a significant impact on your monthly mortgage payments. But fear not! In this blog, we’ll explore practical steps and strategies to help you navigate the transition smoothly and mitigate the effects of rising interest rates. So, take a deep breath and let’s dive into the world of mortgage manoeuvring.

1. Assess Your Financial Situation:

Before you hit the panic button, take a moment to assess your financial situation. Review your budget, income, and expenses to understand how a potential increase in interest rates could affect your monthly payments. Consider factors like job stability, future income prospects, and any potential changes in your financial circumstances. This evaluation will help you gauge your ability to absorb higher mortgage costs.

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2. Research and Monitor Interest Rate Trends:

Stay informed about current interest rate trends and forecasts. Keep an eye on financial news, consult reliable sources, and engage in discussions with mortgage professionals. While no one can predict future rates with certainty, understanding the overall market sentiment can provide valuable insights for planning ahead. Be prepared for both short-term fluctuations and long-term trends in interest rates.

3. Consider Fixing the Rate Again:

If rising interest rates cause you sleepless nights, exploring the option of fixing the rate again might provide peace of mind. Speak with your mortgage advisor or lender to discuss the possibility of locking in a new fixed-rate mortgage. While this may not be the best solution for everyone, it offers stability and protects you from further rate hikes. However, remember to evaluate any associated costs and compare the new rates with other options.

4. Review Your Mortgage Options:

Evaluate different mortgage products available in the market. Research variable-rate mortgages or tracker mortgages that have interest rates linked to a benchmark, such as the Bank of England base rate. These mortgages often offer lower initial rates but can fluctuate over time. While variable rate mortgages carry some level of uncertainty, they may be suitable if you anticipate a shorter-term stay in your current property or have confidence in your ability to handle potential rate increases.

5. Create a Financial Cushion:

Building a financial cushion can help you weather the storm of rising interest rates. Start by saving a portion of your income and establishing an emergency fund. This safety net can provide a buffer to cover any unexpected increases in mortgage payments or other financial challenges that may arise. By having a solid financial foundation, you can mitigate the impact of rising interest rates and gain peace of mind.

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6. Explore Overpayment Options:

Consider making overpayments on your mortgage to reduce the overall balance and decrease the impact of rising interest rates. If your financial circumstances allow, making additional principal payments can help you build equity in your property faster and potentially reduce the term of your mortgage. Check with your lender for any restrictions or penalties associated with overpayments, as some mortgages have limits on the amount or frequency of overpayments.

7. Seek Professional Mortgage Advice:

Navigating the complex world of mortgages is no easy task, especially when faced with concerns about rising interest rates. To make informed decisions, seek advice from a professional mortgage advisor. They can provide personalized guidance based on your financial situation, long-term goals, and risk tolerance. A mortgage advisor can help you explore different options, compare rates, and find the best solution tailored to your needs.

8. Revisit Your Budget and Cut Expenses:

If the prospect of higher mortgage payments looms large, it’s time to review your budget with a fine-tooth comb. Look for areas where you can cut back on expenses and redirect those funds towards your mortgage. Trim unnecessary subscriptions, reduce discretionary spending, and renegotiate service contracts to free up additional cash. By tightening your financial belt, you can alleviate some of the pressure brought on by rising interest rates.

While the thought of rising interest rates after a 5-year fixed mortgage may cause anxiety, it’s important to approach the situation with a proactive mindset. Assess your financial situation, stay informed about interest rate trends, consider fixing the rate again or exploring alternative mortgage options, build a financial cushion, and seek professional advice.

By taking these steps, you can navigate the transition successfully and ensure your financial stability in the face of changing interest rates. Remember, knowledge and preparedness are your greatest assets in this journey towards mortgage tranquillity.

Don’t hesitate to work with a mortgage broker! We’ve been helping clients with their remortgages, and we can help you too. Hudson Rose are an established team of expert mortgage advisors who will do all the research and heavy lifting to ensure the process is smooth and simple. So why not Give us a call today on 0330 122 9920 or book in for a chat (free of charge) with one of our expert advisors!

Check out more blogs from the Hudson Rose team

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Hudson Rose Services Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority.
Hudson Rose Services Ltd, trading as Hudson Rose. Registered Office: 7 Bridge Street, Nailsworth, Stroud, GL6 0AA
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