Are you confident about repaying your mortgage?

Your mortgage is one of your biggest financial commitments, and as such, you do not want to have sleepless nights worrying about repaying this debt.

It is more important than ever to be on top of your repayment plan given that many households are seeing their monthly mortgage bills going up. According to analysis by Nous, the average monthly mortgage bill has more than doubled in some areas. Take Cornwall, for example, where the typical repayment has risen from £565.38 in July 2020 to £1,142.36 in July 2023.

Similarly, average monthly repayments have gone up from £553.59 to £1,121.39 in the Vale of Glamorgan over the last three years, and in East Lothian, they have increased from £582.69 to £1,276.30.

Figures also showed that there are only three areas in London, the south-east and the south-west, where a household can pay less than £1,000 a month on their mortgage – Plymouth, Gloucester and the Forest of Dean. Mortgage holders cannot simply stick their head in their hands and ignore the need to be prepared to keep up with their financial obligations.

Decline in number of interest-only mortgages

According to FCA data, the number of interest-only mortgages and part-interest-only mortgages has halved since 2015. This, it says, is a consequence of borrowers increasingly taking up repayment loans or repaying earlier than anticipated. But despite this shift, there are still plenty of people with interest-only mortgages who will see them mature in the next few years.

In fact, the FCA estimates that 72,000 will mature in 2031 alone, followed by a further 77,000 in 2032. Although this is not that far in the future, it does mean that many do still have time to put a repayment plan together and make sure that there is no outstanding capital at the end of their term.

According to a new study by the Financial Conduct Authority (FCA), 82% of borrowers are confident that they will be able to repay the outstanding capital at the end of their mortgage term. But worryingly, the regulator thinks that some people’s confidence might be misplaced. That is because while 36% of borrowers expect there to be some shortfall, the FCA believes the real figure will be around 46%. In other words, nearly half of all borrowers might struggle to repay their mortgage in full, and many are not prepared for it.

So what can be done?

Well, the FCA recommends that borrowers without a repayment plan get in touch with their mortgage lender to discuss what options are available. This is certainly prudent advice for mortgage holders who are risking a shortfall, as acting sooner rather than later is always the best approach, and your credit rating will not be affected if you decide to speak to your lender. By making sure you have a repayment plan in place, you will be in a much stronger position to keep up with all your financial obligations, not just your mortgage, and work towards your wider goals.

If you’re unsure about what you should do, then get in touch with your mortgage lender in the first place. Of course, an independent financial adviser can take a look at your finances in the round, which can help you keep up with repayments without compromising on your wider ambitions and objectives.

Please don’t hesitate to get in touch with us and we’ll be happy to speak with you.