With Interest Rates Rising, It May Be Time For Homeowners To Rethink Their Budgets | February 2024
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With Interest Rates Rising, It May Be Time For Homeowners To Rethink Their Budgets

Much of the focus on the current economic climate has fallen on renters and would-be homebuyers. The mortgage crisis has been personified as ‘turmoil’ by observers including The Guardian, with large banks including HSBC and Santander pulling offers, NatWest hiking rates and underwriters also increasing their rates.

With these rate increases comes risk for current homeowners, and the interest rates are likely to be hiked further to try and tackle inflation – spelling bad news. With that in mind, it may be worth assessing whether the property can do some work for homeowners, and readjusting the budget after that.

Riding the crest

Inflation and interest rates are rising, and yet the UK economy has continued to grow – even just slightly, at 0.2% – and house prices have remained steady. That may not last, however. According to Reuters, credit auditors Moody’s have predicted a 10% backsliding in UK property prices over the next two years. As such, equity release or other related products based on house value are likely to be at maximum value now. With mortgage rates rising, however, many homeowners will not want to refinance and risk worse terms.

An alternative is second charge or homeowner loans. Ocean, Norton and ABC Finance homeowner loans use the property as security and will have interest rates pegged to the property value, the credit history of the borrower, and other relevant factors. Using this cash injection may be helpful in riding out the current financial maelstrom – especially for homeowners on variable mortgages who will expect to pay less monthly in the future.

Comparing prices

Aside from harnessing the power of the property, it’s important that homeowners look for ways to cut their budget elsewhere.

According to the Money Supermarket, 60% of households remain on standard variable tariffs for energy, and haven’t even considered switching – they could be saving significant money by doing so. The same goes for the internet, insurance, and private healthcare. Looking for new providers, or negotiating with the current, can save significantly.

Changing groceries

Supermarkets have continued to profit through the cost of living crisis. While it’s the view of many analysts that they aren’t necessarily profiteering, it has remained the case that they are operating on a profit margin; while flat, it remains around 5% for the likes of Tesco and Sainsburys. It has always been a no-brainer to look at the budget supermarkets, Lidl and Aldi among them, for a better deal, but their prices have remained low.

According to Which?, a shopping basket in Aldi will cost £68, compared to £77 in Tesco and £79 in Morrison’s for the same product.

It is difficult to try and cut back and rebudget – you work hard and want to spend your money on the luxuries and nicer things that you should be able to afford. Unfortunately, economic realities mean, for the time being, it’s necessary to tighten the belt.

 

 

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Disclaimer: Please be aware that this site is no longer under active management. As a result, we cannot assure the accuracy or relevance of the content provided. Visitors should use their discretion and consider the potential for outdated or inaccurate information before relying on any material found here.