The mortgage crisis – is the house collapsing?

At the time of writing, the average mortgage rate in the UK for a two-year fixed loan is now above 6%. This is the highest it has been since the late 1980s.

Paperweight, the Jewish Community’s Advice Centre, takes a critical interest in the mortgage market – not because we offer low-cost mortgages (we have been asked, however our FCA accreditation, not surprisingly, does not cover mortgage-broking), but because mortgage costs and the domino effect of unaffordability, impacts the entire community.

Press articles abound with theories and explanations for the interest rate rise. Since most of us have not wittingly contributed to the reasons, nor can we alter global economic forces, we are unable to provide political commentary.

What Paperweight is seeing is the immediate effect of the interest rate increases on our community and alarm bells are ringing. In its simplest form, borrowers have taken on excessive debt, many times encouraged and enticed to do so by a greedy industry, tipping their mortgage payments into unaffordability should interest rates rise…. which they always do, sooner or later.

At time of writing, this has come to pass.

As a direct result of property price rises and the relatively low cost of mortgages in the last decade, homeowners have borrowed very high sums in relation to their incomes. Home ownership has always been seen as a wise investment as the value typically increased year on year, but most buy due to a desire to own their home. Any investment gain is a bonus.

The pressure to climb the property ladder in the Jewish community also carries with it (historic) and not-easily-dismissed, social connotations – more so in the UK than in Europe, the US or Israel where renting is more prevalent.

Unfortunately, with the cost of borrowing increasing out of all proportion to income, homeowners are being squeezed. Whilst domestic mortgages are a mix of repayment or interest only, regardless of “the deal”, the increased monthly outlay is playing havoc with domestic finances.

How can Paperweight help? Our Money Advice Team, regulated by the FCA, will have a full, frank and confidential discussion with you about the details of all your income and outgoings. They will show you where reductions in outgoings can be achieved, they may even find you are entitled to a benefit or rebate. They will certainly encourage you to prioritise your spending and adjust your budget where possible.

On the question of how the mortgage companies will pursue late payers, underpayments and payment gaps, this becomes much more tricky. No lender wants a bad reputation, but all lenders want to balance their own books. Paperweight will help you present your case if ongoing communication with your lender will, in any capacity, help minimise the impact of their demands – because hiding from unpleasant correspondence is no answer.

At time of writing, the idea that the government should introduce Mortgage Relief in one form or another depends on which side of the fiscal-policy fence the journalist sits, but the articles are coming thick and fast and the debate continues. If it happens in some form or another, Paperweight will be here to explain how, or if, it affects you and what steps you should take to benefit from any changes in the rules.

The Paperweight Trust is authorised by the Financial Conduct Authority - FRN 973164

Paperweight.org.uk. info@paperweight. org.uk 0330 174 4300

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