We’re on a variable rate mortgage and it has gone up dramatically over the past couple of months. We are really struggling to meet our mortgage payments and it may be impossible if it goes up again. What should we do? We’ve cut down on our spending as much as we can.

North Norfolk News: Smith & Pinching independent financial advisor Diane FishSmith & Pinching independent financial advisor Diane Fish (Image: Smith & Pinching)

Diane Fish of Smith & Pinching responds:

The most important thing is not to bury your head in the sand. If you don’t think you will be able to make a mortgage payment, speak to your lender immediately. Most lenders have people trained to deal with this scenario.

If you are on a variable rate, you may be able to switch to a fixed rate product which would give you the certainty of your monthly payments for a set period. A fixed rate could perhaps be at a lower rate than the variable rate – but there’s no guarantee of that.

If you think that your difficulty with paying your mortgage is going to be a short-term issue, then your lender may agree to you having a temporary mortgage repayment holiday. Alternatively, the lender might offer the possibility of making interest-only payments on a temporary basis. It’s important to remember that the whole amount and any interest due will still have to be paid back at some stage. Any missed payments will be added to your loan and you may end up paying more interest in the longer term.

If you are concerned that you will always have problems paying your mortgage, you may be able to negotiate an extension to the term of the loan, so spreading your debt over a longer period of time. Again, you are likely to pay more interest on your borrowing if you extend the mortgage term and changing your mortgage contract is likely to incur fees.

One option might be to downsize to reduce the amount that you need to borrow. However, lenders are being cautious and rates have gone up across the board, so you may not find it cost-effective to move to a smaller home, especially when you factor in the cost of moving and any fees involved in changing your mortgage.

Please make sure that you are proactive about your problems with paying your mortgage. Falling into arrears will have an adverse effect on your credit record, and consistently failing to pay may result in your home being repossessed.

We do not offer deals that you can only obtain by going direct to a lender. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £950. Any opinions expressed in this article do not constitute advice.

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