Simple mortgage step could save homeowners £5,000 and 'offset effects of inflation'

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Last month the Bank of England announced two detrimental aspects of economy for households, namely the interest rate doubling and record high inflation rates. Homeowners paying off a mortgage amid rising prices may find themselves at the end of their rope which is why Experian head of consumer affairs James Jones shared his insights.

Mr Jones shared: “Households across the country are feeling greater strain on their finances as inflation and the cost of living continue to climb. Economists have reported on the increased costs of groceries, while the price cap for energy bills is set to rise by £693 from April for the average household.”

The potentially devastating impact of this on personal budgets leave many feeling hopeless, but as Mr Jones pointed out during an exclusive interview with “There are a number of steps you can potentially take to help future-proof your finances. One option, for homeowners, is to explore remortgaging.”

Experian and L&C Mortgages shared analysis that found borrowers could save almost £5,000 by switching and remortgaging.

The report explained that a homeowner with a £150,000 20 year mortgage on a standard variable rate of 4.49 percent will have a rough monthly repayment of £948.16.

However, the same mortgage on a two-year fixed rate remortgage deal with 1.34 percent interest has a monthly repayment £712.83, saving homeowners roughly £5,64.92 over the two years.

READ MORE: Council tax: Britons could get £150 rebate quicker by changing payment method

This research prompted Experian to encourage consumers to consider switching for a better mortgage deal and “take control of their finances”.

Mr Jones commented on the report saying: “The cost of living continues to increase, with many consumers feeling a squeeze on their finances. 

“By exploring remortgage options now, homeowners could secure substantial savings by switching to a new fixed-rate mortgage deal, to help offset the effects of inflation.”

With the current global situation, many families are working to simply make it through the day and have little regard for their finances anymore. 

While the state of household budgets is increasingly negative, that puts all the more importance for households to get ahead of their own finances as doing so could greatly improve their situation. 

Mr Jones continued: “Taking no action will mean you lapse onto your lender’s standard rate, which will usually lead to a hike in your monthly payments. Many economists are predicting that the Bank of England will raise interest rates again. 


“As mortgage repayments could also increase, it’s worthwhile exploring your options now and get a new rate locked in.

“You can get help with this by seeking advice from a fee-free mortgage broker. It’s also worth taking a moment to review your credit score and, where possible, make improvements ahead of any formal credit check.”

Mr Jones went on to share six of his top tips to cap family spending and help households weather the cost of living storm. 

Unnecessary spending

Mr Jones recommended households log their income and regular expenses, making special note if they are spending more than they have coming in. 

He added: “Review your direct debits, standing orders and other regular payments to see if you’re spending money on subscriptions that you don’t need too. Making small savings by cutting down regular spending can help accelerate your progress towards key financial goals.”

Switching to save

In a similar line to the remortgaging tip Mr Jones shared, he suggested households check to ensure they are on the best tariffs possible.

He highlighted that changing car insurance providers, especially if one finds their driving habits have change, could see them getting a lower rate. 

Work savings

Many people put money into their savings and do their best to forget it exists, but as interest rates are generally far below inflation this is no longer enough to keep one’s savings competitive. 

Mr Jones shared: “Make sure you’re getting the best interest rate you can, including considering locking up your money for a year or two to get higher returns. Alternatively, consider using some or all your savings to reduce any existing borrowing.”

Credit score makeover

Having a good credit score has a lot of indirect financial benefits, such as saving money on loans, so Mr Jones recommended savers try their best to build their score. 

Tackle debt

With the interest rate rise last month, many households are incredibly concerned for their debts which seem to keep piling up. 

Mr Jones recommended tackling “any unmanageable debt head on”, even if it includes reaching out for help if they find they are falling short. 

He shared: “Don’t be tempted to take out further credit if you’re already in trouble because borrowing more at this stage is only likely to make your situation worse. Free, professional, confidential help is available from several reputable services including National Debtline, Citizens Advice, Payplan and StepChange.”

Family affairs

Many parents assume schools will teach their children all they need to know about finances, but this often isn’t the case.
Additionally, good financial habits and money management is often better learnt in practice than in theory which is why Mr Jones recommended making finances a “family affair”. 

He noted that the Money & Pensions Service found good financial habits are typically developed from the age of seven, “so helping children develop a healthy relationship with money, from budgeting to saving, from an early age can really give them a head start in life”.


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