Experts advise when to fix a mortgage - and how to deal with rent hikes

A mortgage broker and Generation Rent spokesman share their advice for mortgage-holders and renters with ITV News

Homeowners and renters face years of pain as interest rates are set to keep on rising and the Bank of England warning a million households could see their mortgage payments increase by £500 per month.

On Wednesday the BoE said the average household will see their monthly interest payments go up by about £220 if they are refinancing, with 1.5 million seeing their payments go up by £500 or more.

The announcement came a day after the average interest rate of a fixed-rate mortgage hit the highest level in 15 years at 6.66%, 0.01% higher than the peak reached last October during the height of the mini-budget crisis.

Despite the pain, the BoE looks set to carry on increasing interest rates, with the current figure sitting at 5% after 13 consecutive hikes in a row.

The government and monetary policymakers are insisting the measures will help tame rampant inflation.

ITV News has the latest advice for mortgages and renters from experts, who give their views on whether the time is right to fix your mortgage - and how to deal with a landlord hiking rent.

Mortgage broker Tayo Oguntonade and Generation Rent spokesman Conor O'Shea share their advice with ITV News viewers. Credit: ITV News

'Mortgage shock' ahead

Mortgage broker and property expert Tayo Oguntonade told ITV News the latest interest rate rise would leave homeowners - and first-time buyers in particular - fearful of what lies ahead.

He said he had noticed an increase in people approaching mortgage brokers for advice on what to do about rising rates.

"At the moment, we are seeing people on variable rates - their mortgage payments are going up.

"People on fixed rates, their mortgage payments will stay as it is for now. But the problem we are having is that by the time they come off that fixed rate it's likely to be a much higher rate, and their payments will jump up."

Homeowners are bracing for remortgaging pain, as they come off fixed interest rate deals offered during a period of cheaper lending stimulated by monetary policymakers following the financial crisis.

Some rates on offer were lower than 2% - and homeowners will emerge from those deals to a new reality of mortgage products bearing interest rates higher than 6%.

"A lot of people are calling it a mortgage shock - a mortgage cliff," Mr Oguntonade said.

"To give you some context, two years ago in 2021 the average two-year deal was 2.59%. Today, it's over 6%.

"So, it's quite common for people (to be) seeing their mortgage payments going up by £300, £400, £500 a month."

Borrowers coming off those lower fixed deals in coming months face a "mortgage cliff," as they have no choice but to move onto a higher rate, he warned.

"The difficult thing is, there's nothing they can do about that- that's the rate."

He added: "It's a really challenging time for people."

Private renters from across England gather in Westminster Credit: Jonathan Brady/PA

'Renters are facing peak unaffordability'

Conor O'Shea, policy and public affairs manager at Generation Rent, a campaign group that speaks on behalf of private renters, said renters have long been weathering unaffordable housing costs.

"To be frank, this is not the only thing that is really badly affecting renters at the moment - specifically when it comes to affordability," he said.

"We're living in a world where renters, particularly renters in some of the bigger cities, are basically facing peak unaffordability."

Figures recently showed the average rent for a room in London had topped £1,000 a month.

"There's no more give in people's wages or pay packets to give to rent," Mr O'Shea said.

"And landlords may wish to pass on some of these costs from mortgages - although, what I would say is only about 40% of landlords do have a mortgage. So 60% won't - hopefully won't - be passing on any further costs."

Mr O'Shea added: "There's basically no further give for tenants, and they're really, really struggling at the moment."

Nationwide said the housing market remains subdued following turbulence sparked by the mini-budget last September Credit: PA

What if your fixed rate mortgage is coming to an end?

Mr Oguntonade recommended being "proactive," locking in a deal early, and then "holding on" to try to get the best fixed deal available closer to the deadline.

"To give an example, my mortgage is expiring in roughly about six months. Speak to an experienced broker that can look for deals," he said.

Speaking to ITV News in late June, Mr Oguntonade said: "Brokers are important right now because they can try to get the cheapest deals possible. I managed to find a deal at 4.85% about two weeks ago."

He said he had received that offer in the post - but is not obliged to take the deal.

"That offer does last for six months, so what I could now do is wait until six months until my deal expires - and at that point in time, if mortgage rates are at around 5%, 6% - I know to stick with that offer that was sent to me in the post of 4.58%."

If rates go down as low as 4% - which he believed was "unlikely"- courting that deal early means he is not obliged to take on the higher interest rate offer, and can then "shop around" for a lower one.

The change in interest rates will not make a difference to those still on a fixed rate mortgage. Credit: PA

Should you choose a fixed or variable mortgage?

The deepening mortgage crisis has prompted lenders to withdraw hundreds of deals from the market in recent months.

Some borrowers have questioned whether they should move onto variable mortgages, in hopes they would be poised to take advantages of interest rates coming down in the near future.

Mr Oguntonade said the question of whether to fix or go onto a variable rate was "tricky," given the current volatility in the mortgage market.

He told ITV News the decision would depend on the balance of a borrower's mortgage.

"If you have a lower balance, maybe coming to the end of your mortgage, you may stick on variable because it gives you that flexibility, you get to wait it out effectively.

"If you're a first-time buyer, that bought during the stamp duty holiday in 2021 and stretched your affordability, and your loan is massive, some of these people can't afford to go on a standard variable rate, because these standard variable rates are 7%, 8% - so you have to fix."

He recommends worried mortgage-holders keep themselves informed, and do what's best for their individual situation.

Sometimes, borrowers looking for stability will choose a fixed mortgage for peace of mind - knowing it's a repayment rate that they are "comfortable with", and won't change, he said.

"It's kind of like the devil you do know."

What should you do if you can't afford your mortgage payments?

Again, being proactive is key, Mr Oguntonade said.

Banks and building societies are heavily regulated, and are compelled to have team that deals with people struggling to afford their repayments.

He recommended contacting your mortgage lender for advice, "they may be able to help you."

Interest-only mortgages

Options include "temporary fixes," such as: moving onto an interest-only mortgage.

This means you only pay the cost of borrowing, but you don't pay down any of the original capital and won't build equity in the property.

Lenders may offer this solution for one or two years while you get back on your feet and then you will need to return repaying your mortgage capital, Mr Oguntonade said.

Longer mortgage terms

Lenders have recently reported a rise in borrowers asking for 30 and even 40-year mortgages, instead of the standard 25-year loan term, as first-time buyers seek lower monthly payments and remortgaging homeowners extend to spread out their costs over a long period.

Someone who had 23 years left on their mortgage term could ask their lender whether they could extend it to 28 years, reducing their monthly mortgage payments, Mr Oguntonade said.

"It does mean that you're paying more interest over time, but once again, it could help you get over this mortgage shock."

He urged lenders to be more proactive about letting borrowers know what they can do to help them.

Along with banning no-fault evictions, renters reform plans would strengthen landlords’ rights to boot out tenants for antisocial behaviour. Credit: PA

What should tenants do about rent hikes?

Renters up and down the country are facing hikes as some landlords pass on the costs of their mortgage payments, and others seek to cash in on demand, and the rising market rate.

Mr O'Shea said: "To be honest, it's a very difficult picture for renters who can't afford to pay their rent, and it's very possible that's (affecting) people who didn't think they were going to be in this position beforehand."Affordability remains a major issue in the private rental sector in particular.

"What they can do is speak to their landlord first and foremost, and say they are struggling to pay their rent - there may be some compromise they can make. Good landlords will often prefer to do so.

"But they do need to be aware of going into (rent) arrears for too long, because that's certainly something that can end up in eviction."

Industry experts say a fall in the number of landlords means the amount of property available to rent is shrinking. Credit: PA

What do do if your fixed term rental agreement is up for review?A lot of renters will be bracing for rent hikes, when their tenancy's fixed term - typically 12 months in England - comes to an end.

"An open conversation with your landlord might be useful, but ultimately there's not a huge amount you can do - if the landlord decides to hike the rent beyond what you can afford, you are in trouble."

However, he does recommend renters struggling with landlords asking for more rent research the First-Tier Tribunal.

If a landlord offers a rent hike a tenant believes is unreasonable - or higher than the market rate - a tenant can bring their case to the tribunal, who will decide what the market rate is.

"It's not a perfect solution, but what it can do is if someone is essentially trying to profiteer off you, that will be stopped from going too far."

Michael Gove said the Renters’ (Reform) Bill will allow tenants to challenge poor landlords without losing their home. Credit: PA

Be wary of eviction potential

An eviction based on rent arrears can end up on your record, and make it more difficult to secure another tenancy in the future, Mr O'Shea warned.

However, landlords still have powers to kick tenants out with eight-weeks' notice without giving any reason at all - these are known as 'no-fault evictions.'

The government's rental reform bill, which should end Section 21 evictions, is still winding its way through Parliament.

This means the legislation has yet to take effect - leaving tenants vulnerable in the interim.

Mr O'Shea warned: "People are less likely to speak up. There's a huge issue with 'If I ask for there not to be a rent increase, or I ask for a rent increase not to be as stark as it is, the landlord is in a strong position to, essentially, throw you out and find somebody new."

He urged the government to bring the bill back to Parliament "as soon as possible," to "empower tenants" and protect them from facing the threat of eviction.

However, he said a lack of protections in the bill to protect tenants from soaring rent hikes was a "real gaping hole," and did not stop landlords using the "back door" method of hiking rents beyond what a tenant can afford, to remove them by stealth.

Mr O'Shea said while there was some reports landlords were looking to sell to walk away from the costs of owning a private rental - it wasn't as many as their advocates were claiming.

"It's still a good time to be a landlord, and it's still quite a difficult time to be a tenant," he said.

He called for a progressive housebuilding programme to replenish depleting social housing stock, and introduce more supply into the squeezed property market.

First-time buyers need to find almost double the average deposit compared to a decade ago. Credit: PA

Is it a good time to buy a home right now?Some first time buyers hoping to avoid soaring rents are wondering if the trouble in the mortgage market could foreshadow a coming house price crash - and a chance to get on the property ladder.

"I think the simple answer is there's no way of timing the market right," Mr Oguntonade said.

He said first time buyers needed to understand buying a house and maintaining a mortgage was a "very individual process," and question whether the rates are affordable for them.

He added: "When interest rates go up, what generally happens after a while is that house prices come down, effectively - and that may benefit some buyers, it may be a loss to some buyers.

"What they really need to understand is 'is that mortgage that I'm taking out affordable for me in the long-run?"

He pointed to the Covid pandemic as an example of unpredictability for the first-time buyer market.

"At the beginning of the pandemic everybody predicted that house prices would come crashing down, and they did the complete opposite."

No one can truly predict the housing market, he warned.

He advised: "There's no way to predict it. Just look at yourself - 'is it affordable for me?' and if it is affordable, and you are encouraged to do so, you actually want to buy a house- then go for it."

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...