It’s the time of year when people reassess their financial health – from pensions, investments and savings to mortgages and protection.
Mortgages are a hot topic at present with the rate rise late last year.
That made people stop and think “what rate am I on” and “could I afford it if my mortgage payments went up”.
Pertinent given mortgage repossessions are just starting to move ahead.
Ministry of Justice figures for England and Wales, the July to September period last year, the latest available, show mortgage possession claims reached 4,757, six per cent above the same quarter in 2016.
Little to worry about, you might think, in comparison to the peak of 26,419 in April to June 2009, the height of the financial crisis.
But a trend seems to be developing – possession claims have been edging up since October to December 2016.
Statistics for the first half of 2017 produced by leading debt charity, StepChange, found that mortgage arrears is – jointly with council tax – the biggest source of debt for households. At 31 per cent it takes priority over other concerns such as water bills (24.4 per cent), rent (22.2 per cent) and hire purchases (20.6 per cent). Typically, average mortgage arrears amount to £3,581.
However, many people have been lulled into a false sense of security – the autumn base rate rise was the first for 10 years.
So, what will 2018 hold?
What affect would that extra £50 per month have on lifestyles if rates continue to rise, albeit slowly? For some people, not a lot, but if it happened every month then complacency could be costly.
Some of us remember when rates hit 15 per cent and mortgage payments doubled. That was when we were tumbling out of the Exchange Rate Mechanism in 1992. Millions faced potential disaster, a fateful experience never to be forgotten.
Hopefully, nothing like that will happen again.
Nevertheless, as rates increase, the cheaper mortgage deals disappear, sometimes within days and, with more stringent checks now for all mortgage clients, it could be time to examine your financial position and secure your monthly payments to enable budgeting, if that is what you prefer.
It’s the time of year when people start to think about moving, improving, extending their home or clearing off the excess spending of the holiday season. These things are all possible with planning and organisation, and stamp duty cuts for first time buyers, announced in the autumn, have helped. The Bank of Mum and Dad can typically come up with deposits, in the process allowing empty-nesters to downsize, go on that dream holiday or take up a well-needed retirement. Even much criticised equity release has become popular again.
Remember – paperwork needs to be in order for a mortgage application even it’s a further advance. Start to keep those payslips rather than tucking them away and forgetting where they are. Bank accounts need to run within an agreed overdraft – passports and driving licences must be in date to progress new lending.
It is also a good time to review direct debits. Are you spending money on items you don’t need, such as that subscription to an unread magazine or membership to a club you no longer attend?
By doing this the money can be redirected to other sources such as paying off the mortgage a year earlier perhaps. Important to review protection too – your benefits may no longer be providing what is needed for your growing family or conversely you have changed occupation and your benefits have improved.
The options within the mortgage have never been greater, far greater than people realise.