Mortgage payments often involve households having to use a significant portion of their income to go towards meeting the cost, meaning reduced money to work with throughout the month. In fact, many households across the country are struggling with what is commonly known as mortgage poverty. Mortgage poverty or being ‘house poor’ is a household which spends a large proportion of their total income on progressing towards home ownership.
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And recent research has shown many are struggling to keep up with their mortgage payments.
A report released by the Institute for Fiscal Studies (IFS) revealed mortgage payments took a 14 percent drop when compared to payments before the pandemic.
In addition, rent payments have decreased by 11 percent below predicted amounts, and council tax payments dropped by nine percent.
The IFS said: “This represents a further deterioration since April, suggesting some households were increasingly struggling to make ends meet.”
According to research, average UK household earnings also witnessed a nine percent drop from April to May, demonstrating the continuation of financial issues across the country.
Amid the difficult circumstances for many families across the country, there are ways to keep on top of payments.
The online mortgage broker Trussle has offered mortgage payers its top tips for avoiding mortgage poverty.
Firstly, future homeowners should check the status of their mortgage.
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Trussle states that for the average borrower, the difference between a market-leading deal and the average Standard Variable Rate is around £4,500 in extra interest each year.
People should therefore look at when their initial fixed rate term is due to end, and review their mortgage three to six months before the end of the initial deal.
This is likely to open up opportunities for switching, which could save borrowers money.
Remortgaging could save people money, as Trussle states two in five borrowers often miss out on a cheaper deal by sticking to their usual lender.
Remortgaging calculators can help Britons find out what option is best for them.
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Product transfers could also be a suitable choice for borrowers to make, as on average £326.31 a month can be saved.
Eligibility for a product transfer can be checked through a person’s existing lender, and huge amounts of money could potentially be saved.
In addition, switching to an interest only mortgage could lower monthly payments, but Britons should take advice to see if this is right for them.
Finally, taking a mortgage payment holiday could be a sensible option for those who are really struggling to meet payments amid lockdown.
However, borrowers are urged to take caution if considering this financial support.
This is because while payments stop for a while, interest can continue to rack up.
A mortgage holiday, then, is not ‘free money’, and may result in higher mortgage payments upon eventual return.
Mortgage advice is always open to Britons, and this can be achieved through an independent mortgage broker or other similar organisations designed to offer assistance.
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