6 ways to handle rising mortgage payments

Over the past year, rising interest rates have left some homeowners with surging monthly mortgage commitments – and those looking for a mortgage with very few affordable choices. We run through some options that might help your situation.

The UK’s inflation rate has been high for some time now, and to try to bring things under control the Bank of England (BoE) has increased interest rates. These increases have come as a shock to many people with mortgages.

Rate rises have a noticeable effect if you have a variable or tracker mortgage because most lenders have raised their rates on those types of products. The Resolution Foundation estimates that anyone remortgaging in 2024 may see their annual mortgage costs rise by £2,900 on average.

If you’re concerned about meeting your monthly repayments, here are six ways you could relieve some pressure on your finances in the short and long term.

1. Look for a fixed-rate deal if you want stability

Guessing the interest rate rollercoaster isn’t for everyone. If you want a predictable monthly outgoing then a fixed-rate mortgage could work for you, although they can cost more. The catch is finding a product with a rate that isn’t too high, but lenders are putting competitive products on the market fairly regularly. You'll need to factor in the arrangement fee and weigh up any early repayment penalties to work out whether this is the best option for you.

An adviser can help you stay on the right track. For example, a two-year deal might be better for you than a five-year deal if rates keep coming down. Some lenders let you lock in a deal six months before your current one ends – so it pays to shop around. Unfortunately, there's no certainty and the best deal will depend on the market and your current situation.

2. Be alert if your deal is coming to an end

If your current deal is coming to an end, it’s important to find out what you could be paying when it moves to your lender’s standard variable rate (SVR). If you’re planning on selling your home or porting your mortgage to a new property, you may decide not to move to a different type of mortgage regardless of the SVR. But if you’re not moving then it’s worth getting advice about finding a better deal.

3. Consider a tracker rate product

A tracker mortgage usually follows the interest rate set by the Bank of England and this is often lower than the SVR your lender provides. Most trackers do not have early repayment charges, so you can switch lenders easily without having to pay a penalty. This can be a good choice if you expect interest rates to drop, and you want to see if you can find a better deal if they do. Just remember that your payments may go up if the Bank of England's interest rate rises.

4. Extend your loan term

If you’re generally comfortable with your mortgage deal, you could ask your lender about extending your loan term – common extensions are by 5 or 10 years. This could lower your monthly payments because you’d be paying off your loan for a longer period, but the downside is that you’ll be paying the interest on your loan for longer, which means it's costing you more. Your decision all depends on your circumstances, such as your age, working situation, children, stage of life and so on, and whether you’re comfortable with the adjustments – or maybe you’d prefer to be mortgage-free sooner.

5. Consider if overpayments are appropriate

One option is to reduce your monthly repayments by making a lump-sum overpayment on your mortgage. This reduces what you owe and the overall amount of interest you'll pay. You’ll need to check with your lender about the maximum you’re allowed to overpay. Depending on the amount of your mortgage, a modest lump sum could have a noticeable impact on the amount of your monthly repayments.

6. Speak to an adviser

Mortgages are confusing at the best of times, so if you’re not sure where to start then speak to your lender about available options – especially if you’re struggling to meet monthly payments. You could be eligible to take a mortgage holiday for a few months or underpay on your mortgage for a period if your lender allows, but your mortgage will cost you more in the long run. This may give you time to speak to a financial adviser or a mortgage broker to figure out your next steps. Citizen's Advice (Opens in new window) could be a good place to start, and read through the information on moneyhelper.org.uk (Opens in new window) too.

It’s worth exploring all options available to you if you’re in a mortgage rut because of higher interest rates. Seeking advice can help you make the best decision for you.

Recommended reading

• Should I move house?
• How to get ahead of rising living costs
• Should you become a buy-to-let landlord?

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