How to manage rising rents and mortgage interest rates

It feels like everything is more expensive these days, and mortgage and rent costs are no different.

At the beginning of October 2022, mortgage interest rates on two-year and five-year fixes were more than double what they were at the same point a year earlier – 6.07% and 5.97% respectively.  And renting costs are on the rise too, with the average amount paid by private tenants increasing by 3.4% in the 12 months to August 2022.

So what can you do to manage these increases?

Find out what type of mortgage you’re on

A third of UK adults have a mortgage and three-quarters of those have a fixed rate, meaning they will not be immediately affected by increases. But the remaining – approximately 2 million people – will face rising monthly prices. Whilst you can’t directly change the rising prices, knowing what sort of mortgage you have and how you may be impacted will help you budget. And if you don’t already know, you can check to see how any interest rate rise will impact you using a mortgage calculator.

Shop around for the best deal

You might be 20 years or six months away from repaying your mortgage but knowing how long you’re tied into your current agreement is extremely important. If you are coming to the end of your plan, shop around for the best deals on the market or use a mortgage comparison tool. No matter how tedious it can be, finding the best deal could save you hundreds every month!

Educate yourself on the rules of renting

Understanding your legal rights is incredibly important when signing a rental agreement. The 12 months to August 2022 saw the biggest growth in private rental prices since the Office for National Statistics began monitoring the market in January 2016. But did you know that, in most circumstances, your landlord isn’t permitted to increase your rent more than once a year? And did you also know that, when they do, it must be by a reasonable amount? Do your research, make sure you haven’t been exploited and ensure that you’re being charged what is fair – everything you need to know can be found on the government website.

Cut back on spending elsewhere

This is easier said than done, but cutting back on unnecessary spending could ease the pain of increasing mortgage/rent prices. Whether it’s cancelling TV subscriptions or selling unwanted items, there are plenty of ways to cut down your costs and raise some extra cash. For lots of ideas on cutting costs, check out the Financial Wellness blog on 28 ways to be frugal. Here’s a flavour of what you’ll find:

• Cook in bulk. According to data from July 2022 on the Nimble Fins website, a family of four spends an average of £708 a month on food. Cooking in bulk could slash these costs. We recommend buying your chosen ingredients, cooking it all and freezing your meals for a week. That way, you’ll minimise food waste and won’t be tempted to buy a takeaway! Here are some of our favourite slow cooker meals that are perfect for batch cooking.
• Make the most of vouchers. You can save money on a lot of things – including food, clothing and activities – by using discount codes. Honey searches over 30,000 sites to find the best deals.
• Turn down the heating. A simple but effective way to cut heating costs is to take control of your central heating thermostat. Reducing room temperatures by just 1°C could cut your heating bills by almost 10%. Remember to adjust your central heating timer to switch off at night and during the day if the house is empty.
• Go to the library. If you’re a big reader, buying books can be expensive, especially if you’re buying new. Give your bank balance a break by joining a library and renting out books.
• Contact your bank or landlord. If you’re finding it hard to keep up with your rent or mortgage payments, the first thing you should do is contact your mortgage lender or landlord to see how they can help. Mortgage lenders may offer to set up a temporary payment plan, lengthen the term of your mortgage or allow you to switch to temporary interest-only repayments. And landlords may grant you additional time for you to come up with the money. There are no guarantees that your bank or landlord will help, but it’s worth a try!

Make sure you’re claiming the benefits you’re entitled to

Circumstances change, which means your entitlement to government benefits might have changed too. Times are hard and it’s extremely important you’re claiming all the money you’re legally entitled to. Using a benefits calculator takes just a few minutes of your time and will ensure you’re receiving the full income you’re owed. Eligibility criteria change so, even if you weren’t entitled to anything before, you might be now.

Seek emotional support

The sad reality is money troubles can take over your life. Struggling to pay bills, put food on the table or make rent payments is traumatic and scary. But you’re not alone; millions of others are in the same boat. Mental Health & Money Advice offer advice, support and solutions for people who are experiencing issues with their mental health as a result of money worries. They may be able to help you take control of your situation, both mentally and financially.

If you’re concerned about rising interest rates and rent prices, don’t forget to get in touch via LiveChat or by calling us on 0161 672 8989. We’re here to help.