Interview: Cost of living Experts from Haysto and Mortgage Saving Experts on making it through

Weighing up your options during the cost-of-living crisis

Refinancing, consolidating debts, or extending your mortgage are among the considerations

In real-world terms, interest rates going up makes borrowing more expensive, so there can be a knock-on effect, depending on your situation.

First-time buyers might find it harder to get that first foot on the property ladder, for example, as the economic impact affects people’s finances. If they are paying interest on any credit card debts, personal loans, or store cards, then this will see payments go up and less wiggle room each month, which could affect how much they can borrow.

“It could be a good time to prepare and get mortgage-ready, or if they need a mortgage soon, certain lenders offer free valuations and no arrangement fees, which can cut down on upfront costs,” said Paul Coss, co-founder and chief customer officer of Haysto.

Coss explained that Haysto is seeing a lot of people on variable and tracker mortgages looking to switch to a fixed deal, which he believes could be a good idea as it will avoid further increases affecting homeowners’ mortgage payments.

“With energy prices on the rise, bringing down the monthly mortgage payment is a good way to free up some cash, as it is usually the biggest outgoing,” Coss added.

He also believes it is an opportunity for homeowners to assess their financial situation and weigh up options, such as refinancing, consolidating debts, or extending mortgage terms. Some lenders, he noted, are offering free legal services and cashback incentives for remortgage customers.

WHAT’S HAPPENING IN THE MARKET?

On the flip side, he said that this increase in demand for remortgages, coupled with an incredibly buoyant housing market at present, have already led to a massive surge in applications, with lenders taking longer to turn them around because of the sheer volume of applicants.

To try to tackle this, he explained that high-street lenders like Santander have issued amendments in their policies to try to cater for these delays by offering automatic mortgage-offer extensions for one month beyond the deadline, without any proofs or requirements.

“With the Bank of England base rate rising to fight inflation and ultimately the growing cost-of-living crisis, it is actually having a knock-on effect on the cost of people’s largest outgoing, their mortgage,” Coss said.

This will and has, he explained, put many clients off purchasing a property, as they are worried about how high rates will go. He believes those pressing ahead will probably see an increase in mortgage costs in the short term, while suffering from the increases in the cost of living still in play until inflation gets under control.

RED FLAG TO LENDERS

Sara Palmer, head of distribution at The Mortgage Lender, noted that it has already been widely reported that the cost-of-living crisis is putting a significant strain on people’s finances – and where there is financial strain, there are usually missed or late payments.

“With energy bills a particular problem and expected to increase even further in the autumn, there is a real concern that people will be making some difficult choices,” she said. She has already seen increasing numbers turn to buy-now, pay-later schemes.

She said that people often do not realise, however, that this can be a red flag to lenders, with a reliance on short-term finance evidence of financial stress.

In these circumstances, Palmer explained, it is important people reach out to their lenders to discuss their options.

“We know that life does not always work out the way you expect, and there are lenders out there [who will] support in a responsible way,” she said.

In addition, Palmer believes there should be more education available for both brokers and customers on adverse credit and where to find support. She said that brokers should be aware of lenders who do offer products for those classed as adverse, and what their criteria are, to ensure they can guide their clients.

“If the client is not in a position to access a mortgage at the moment, guidance on how to rebuild their credit score and become ‘mortgageready’ is also vital,” she said. M I

How is the broker market dealing with the economic climate?

Inflation to reach 18.6% in January, analysts suggest

As the UK economy continues to be put under pressure due to rising inflation and the cost-of-living crisis, brokers are having to jump extra hurdles to help clients gain access to their desired mortgage products.

The UK economy is set to see inflation rates soar to 18.6 per cent in January, reaching their highest levels in almost half a century, according to investment bank Citi.

“Brokers are really busy at the moment – people are worried about not just increasing mortgage interest rates, but cost-of-living, too, so anything to save money is always a benefit,” said Lyn Webb, director of Mortgage Saving Experts.

Webb said that mortgage lenders and providers are also extremely busy, with some of them taking around 16 days to look at supporting mortgage documentation sent to them.

“Lenders are pulling interest rates regularly, with brokers sometimes only getting six hours’ notice that as of midnight that day, the rate will be gone, meaning working late into the night for us to secure that interest rate for our client,” she added.

As demand for particular lenders is often very high, Webb noted that, as a broker, you are often either in a queue waiting to access their website, or enduring website crashes.

Webb believes that most brokers are worn out, as they are working long days in a very stressful climate.

“Clients do not seem to understand this, and often get frustrated with us when we tell them it may take up to 16 days for lenders to look at additional supporting documents before they agree to the mortgage. I know our staff are really feeling the strain at the moment,” she said.

Webb went on to say that, currently, lenders do not want to be atop the mortgage-sourcing system, as they have enough work at the moment. As a result, Webb said that Mortgage Saving Experts has seen lenders pulling rates or increasing them to levels higher than the rest of the market to deliberately make themselves less appealing.

“I think our clients are shocked by the rise in rates because they have been so low for such a long time”

“Everyone wants to fix their interest rate – my neighbour fixed his for 10 years last year, and is now sitting pretty for another nine years at two per cent, but we as brokers are not fortunetellers and cannot predict what will happen in the next few years, although clients always ask us,” she said.

Webb believes homeowners are conscious of continued rising rates, and noted that some older people remember 1988, when rates rose steadily from 9.8 per cent to 15.4 per cent by 1990.

“Mortgage Saving Experts’ clients are worried about interest rate rises, and many people are requesting to remortgage or are trying to switch from their current fixed rate to a new longer-term fixed rate,” Webb added.

Webb explained that fixed rates are now around 3.44 per cent for a two-year product and 3.49 per cent for a five-year mortgage. She also noted that to come out of a fixed rate early and lock into another rate will incur a fee, which needs to be considered in the process.

“I think our clients are shocked by the rise in rates because they have been so low for such a long time. However, the housing market is still very buoyant, and if a property comes up for sale or rent, it is usually snapped up quickly,” Webb said.

She has seen that clients are trying to save money where they can, often checking their bank statements to see what standing orders or direct debits they can cut. However, she noted that one of the most common monthly payments to cut has been insurance – which can have a hugely negative impact.

Webb concluded, “This is such a mistake for clients, as it could be unemployment cover, critical illness cover, or even life insurance; to reapply when the economy changes will find them looking at increased premiums. It would be better to review other items rather than one’s insurance.” M I