Navigating the rocky waters of rapidly changing interest rates
Over the last three years, high inflation figures have caused the Bank of England to increase interest rates on many occasions with lenders hiking their mortgage rates in response.
While inflation has gone down from highs of 11.1% in October 2022 to 3.2% in March 2024, speculation about when the Bank of England will eventually reduce interest rates, currently at 5.25%, means the cost of borrowing continues to fluctuate, often on a day-to-day basis.
Volatile money markets
Unstable rates create a number of issues. While those with an existing fixed-rate mortgage may not be immediately affected, finding an affordable new fixed rate mortgage, once the current term ends, can be challenging. It is likely to be considerably more expensive than any previous mortgage deal.
Fluctuations in interest rates have also resulted in fixed rate mortgages being withdrawn unexpectedly, before completions, as interest rates rise on the money markets, resulting in lenders withdrawing offers before completion. This can cause major problems for both buyers and sellers midway through the sales process and affect others in the chain.
Those who opt not to renew their mortgages when the fixed rate term ends automatically move to a lender’s Standard Variable Rate (SVR). Not only are SVR rates generally higher than fixed rates, but monthly repayments can go up or down with little notice for similar reasons. As a result, it can make it incredibly difficult to manage repayments and balance household/business budgets. Indeed, over 90,000 homeowners were in mortgage arrears in October 2023, a rise of 25% over the previous 12 months[i].
With the current volatility in interest rates, a fixed rate mortgage can offer increased financial stability. However, as the best deals might mean moving to a different lender, the costs of moving, such as arrangement fees and surveys, can sometimes reduce or even outweigh the financial gains of a better mortgage deal. In addition, as rates are currently the highest they have been for many years, there is good cause to think they will reduce as inflation continues to fall and more importantly stabilises.
Legal help with mortgage repayment issues
If you are unable to afford your mortgage repayments, there are a number of circumstances where you might require legal advice. If you find it difficult to meet monthly payments, or are fearful you jay fall into arrears, a solicitor can negotiate with your lender on your behalf, to put refinancing arrangements in place, such as securing payment breaks, extending the length of the loan or temporarily reducing monthly direct debits.
In some situations, lenders will attempt to evict owners and repossess properties to recuperate any outstanding debt. To do this, they must first be granted a Warrant of Possession by a court.
Legal representation is crucial if you find yourself facing eviction. Depending upon your circumstances, a solicitor may be able to prevent eviction from taking place or ensure that it happens on more suitable terms. For instance, owners can be given more time to find new accommodation or may be able to sell the house themselves to pay off arrears rather than have the lender sell it below market value.
A solicitor will also ensure you are fully aware of your rights and that you understand your responsibilities. For example, even after eviction, owners are still responsible for insuring the property and making mortgage repayments until the property is sold. If mortgage repayments become unaffordable, another option is to downsize or rent.
Choosing an experienced conveyancing solicitor is vital in these matters, to ensure all the legal and indeed financial aspects are handled correctly.
If you are a homeowner or business struggling with mortgage repayments, facing eviction or considering downsizing or moving into rented property, our experienced team solicitors and our conveyancing team are here to provide you with expert legal advice and support.
For more information visit: https://www.wilkinsonwoodward.co.uk/