The amount of money you can afford to repay each month towards your mortgage may change over time. You may be able to afford the monthly repayments now, but you need to consider what would happen if your circumstances were to change in the future. For example, would you be able to keep up mortgage repayments if you or your partner:
- lost your job(s), or had to take a pay cut;
- could not work due to an illness or injury, or
- took time off to have a child or to look after a dependant.
In addition, you also need to consider the possibility of your mortgage payments increasing. This could happen through one of the following:
- A rise in interest rates - Mortgage interest rates are related to the interest rate set by the Bank of England (the Bank of England Base Rate). Any rise in the base rate is likely to affect your mortgage payment, unless you have a fixed rate deal for the full term of the mortgage.
- The ending of special interest-rate deals – Your lender may offer you a special introductory mortgage rate. However, this will only be for a set period and once it ends your monthly payment will increase.
How can I protect against future changes?
- Work out how much your mortgage payment will increase by if interest rates rise by 1% or 2%, using our mortgage calculator.
- Take interest-rate rises into account when calculating your mortgage budget.
- Only borrow the maximum mortgage on offer if you're sure you can afford it.
- Look at fixed rate mortgage deals as these will ensure your mortgage payment remains the same for a set period.
- Work out how much money you would need if you lost your job or had to take a pay cut.
- As an employee, find out what you're entitled to if you become ill or suffer an injury, e.g. statutory sick pay.
If your circumstances do change, it may be a good idea to review your situation and work out your options. You may decide that your mortgage is no longer right for you, in which case you should consider the possibility of switching mortgages.
Note; your mortgage lender may offer you insurance that is designed to help protect your income or mortgage repayments in the event that you are unable tot work due to an illness or accident. Before agreeing to any insurance product, check the policy terms and conditions as there are likely to be restrictions on when and how much you can claim.
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