I’m a mortgage expert and this is how you could save THOUSANDS and avoid rising inflation

THE cost of living is rising rapidly, meaning we’re all facing a big squeeze on our finances.

But sorting out your mortgage could help you lock in savings worth thousands of pounds and beat the cost of living crisis.

Soaring inflation is now at a whopping 5.2% and rumours are circulating that another interest rate rise is on the cards to try and get it under control.

At the same time, wages have tumbled with average pay growth recorded at just 4.2% – much lower than inflation.

That means that as things get more expensive, our take-home pay can’t keep up and we struggle to afford the same things we did just a few months ago.

Inflation causes all sorts of trouble for ordinary Brits, and an interest-rate rise could see mortgage, loan and credit card costs spike too.

Miles Robinson, head of mortgages at Trussle, says: “The immediate impact of rising inflation is that people will be able to borrow less when applying for mortgages.

“Since the financial crash, lenders take the cost of living into account when assessing buyers’ ability to repay their mortgage each month and this figure is tied to inflation.

“As such, if homeowners’ outgoings jump £3,000 due to inflation, they may be able to borrow as much as £15,000 less on a mortgage.”

This problem could also affect any buyers with an existing ‘mortgage in principle’, who might find that they can borrow less than the sum they were originally told because affordability measures are linked to inflation.

The good news is inflation rises won’t immediately affect your monthly mortgage payments. However, if the Bank of England raises interest rates this will impact householders who are currently on Standard Variable Rates (SVRs).

Robinson says: “The amount your mortgage payments will increase depends on the interest rate rises, but the recent increase to 0.25% in November could have added as much as £324.48 onto the average mortgage annually.”

Fortunately, there are things you can do to protect your finances from inflation.

For most people, their mortgage is their biggest monthly outgoing, and so it’s important to make sure that rising rates don’t make it unaffordable.

The flipside of this is that getting a great deal can be one of the best possible ways to beat rising costs.

Here Trussle’s head of mortgages, Miles Robinson, shares his top tips for using your home and mortgage to get your finances in shape and protect yourself from inflation:

Remember you can usually remortgage a full six months before your deal finishes

The advice from us is to take advantage of the current deals sooner rather than later.

Previous research from Trussle found that people can save an average of £3,500 a year by remortgaging, which is equivalent to 15% of the UK’s average salary. 

You may have to pay an early repayment charge to your existing lender if you remortgage.

A 5-year fix could be a very good option in the current climate

With interest rate rises in sight and inflation pumping out at an all-time high, a steady, unchanging monthly payment can ease the worry for many.

There are still some great 5-year deals on the market, especially with a slightly higher LTV, so committing to a little extra monthly payment now could in turn be a great relief should rates and the price of living continue to rise.

The best 5-year fix as of today for an 80% mortgage on the average UK house price is currently 1.72% with Natwest. This goes down to 1.32% with Barclays if homeowners have an LTV of 60%.

Do you qualify for a green mortgage?

A green mortgage essentially rewards you for having an energy-efficient home by offering you more favourable rates. Check the status of the home you are currently in or any new purchase (A or B on your EPC certificates) as savings could be made here.

Green mortgages can offer lower mortgage rates, cashback when you take out the mortgage, or additional borrowing at lower rates.

NatWest, Halifax and Barclays offer green mortgages, with NatWest offering a reduced rate on a two-year or a five-year fixed-rate mortgage, along with cashback.

Investigate part and part mortgages

While not suitable for everyone and lenders will want evidence that you can still comfortably keep up with your monthly payments, part and part mortgages are offered by some lenders, and can be an effective way of reducing your monthly payments.

This is where some of the loan is repayment and some is interest only. Good brokers can fit these products to suit your needs and then make sure you have an overpayment clause to allow you to take advantage and pay off more when that extra income comes in.

Think about overpaying

While rates are low, now could be a good time to start paying that bit extra every month, or as a one-off, if you can.

Check your criteria as most mortgages allow you to overpay by up to 10% per year and the amount that can be saved by doing this regularly is staggering.

Overpaying by just £50 per month can knock almost two years off your mortgage and save you over £5,000 during its lifetime.

Consider an offset mortgage

This links your savings account to your mortgage and means lenders will treat any savings you have like mortgage overpayments.

You will still be able to dip into the savings you’ve chosen to offset, but this will affect the interest you pay. You will also need to have your savings and mortgage with the same provider.

If you are a first-time buyer try to save as big a deposit as possible. 

A bigger deposit means lower interest rates when it comes to getting a mortgage. It will also make you more eligible for a mortgage at the outset.

This might be the time to ask the Bank of Mum & Dad to help out – they probably have a lower interest rate than the standard lenders!

This is also completely normal, research has shown that 40% of buyers now need family support to purchase their first home. 

Ideally, a 20% deposit is a good starting point, but if a 25% were to be obtainable it is likely even better rates will be available.

Trussle’s best first-time buyer mortgage is a 2-year fixed rate at 1.68% from Principality Building Society.

This post first appeared on thesun.co.uk