Last year’s mortgage rate rises may have left you feeling concerned about what you’ll have to pay if your fixed-rate mortgage deal ends later this year or in 2025. Read on for some advice on preparing for the future.

Will your future mortgage payments be affected by previous rate rises if your fixed rate deal is ending in the next year or two? Is there a chance that rates may have come down by the time your deal ends?

Although rates have come down recently, they are unlikely to go back to the historic lows we saw previously. No one can say for sure what will happen in the next few years, but higher rates are likely to persist for longer than previously anticipated. It’s sensible to hope for the best but plan for the worst. Prepare now for the possibility that you could well be paying more when your fixed deal comes to an end.

‘It’s highly possible that rates will stay higher for longer,’ says Monica Bradley, MB Associates’ Managing Director. ‘If you’re in that situation, and you have 12 or more months left on your current deal, I’d strongly urge you to think about what the impact on your lifestyle would be if your payments were to increase.

‘I’m mindful of prices going up in general, but if it’s possible, I would strongly advise you to consider making overpayments to your mortgage now or setting an amount of money aside each month and putting it in your savings. This would mean you’re preparing yourself for what future payments might be. However, when you make overpayments to your mortgage, you don’t pay any interest on the overpayment amount; the balance is reduced by the amount that you have overpaid.’

Reducing your mortgage balance

Making regular monthly overpayments can make quite a difference when it comes to reducing the balance on your mortgage. Essentially, it means you’ll be paying off your mortgage sooner. When you come to the end of your fixed-rate deal, your mortgage balance will be lower, which will not only mean you’ll have less to pay off, but you may also be more likely to secure a more competitive interest rate on a new deal.

While this is one potential solution, it may not be for everyone. ‘You are tying up your cash by doing this,’ says Monica. ‘You might want to look at the savings route as well, where you can still access the money you’ve set aside. Either way, you’ll have committed yourself to paying a higher amount than you’re currently paying. If interest rates go down in future, you’ll end up having more cash than expected.’

If you’re unable to make any higher payments now, when the time comes to switch to a new deal, you may be able to extend the term of your mortgage (depending on your age) or even switch to an interest-only mortgage. However, the criteria for an interest-only mortgage can be quite rigid, and you’d need to have a substantially high income.

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