Preparing for Potential Mortgage Payment Increases in 2025
The Bank of England has warned that mortgage payments for half of homeowners will rise over the next three years, putting 4.4 million households under financial pressure. Among these, about 420,000 households could face increases of £500 or more per month. This trend stems from rising interest rates as the Bank works to combat inflation. While some borrowers have been shielded by fixing their rates before the increases began in late 2021, others may soon feel the pinch as they remortgage or move to variable rates. With 2025 approaching, now is the time to plan for these changes and protect your financial stability.
What Can You Do to Prepare?
Review Your Current Mortgage Deal Check the terms of your mortgage. If you’re on a fixed rate, find out when your deal ends and what your lender’s standard variable rate (SVR) is. This will give you an idea of how much your payments could increase. If you’re on a variable rate, calculate how changes in interest rates might affect your payments.
Budget for Higher Payments Start adjusting your budget to account for potential increases. For example, if your mortgage could go up by £200 per month, practice setting aside that amount now. This not only prepares you financially but also identifies areas where you might need to cut back.
Consider Remortgaging If your current deal is ending soon, explore your options. Speak with us to find out if you could switch to a more competitive rate or lock in a deal before rates rise further.
Build a Savings Buffer Having a rainy-day fund can offer peace of mind. Aim to set aside three to six months’ worth of essential expenses, including your mortgage payment, to give you breathing room in case of financial strain.
Seek Professional Advice Your mortgage adviser is your best ally in navigating rate changes. Assessing your situation, recommending the most suitable products, and helping you manage the impact of higher payments.
Plan ahead to protect your finances. Get in contact today to explore your options and ensure you’re ready for 2025.
If you’d like to discuss the options available to you, contact a member of the Carbon Oxford team.