What to do about an unaffordable mortgage

ListTimes have been torrid. However, through the unrest, stock market falls and house price jitters there has been one small glimmer of hope for those with large amounts of debt or big mortgages - things are so horrible now that we are highly unlikely to see an interest rate rise in the near future.

But for many thousands of people, this is not enough, because there's every chance the rate they pay on their mortgage could still increase. So what's happening, and what can you do about it?
Rising rates
Despite record low interest rates from the Bank of England, and powerful predictions that it could be 2012 before we see any kind of rises, mortgage companies have been sneakily increasing their rates. According to Which? they have been raising their standard variable rates (SVRs), which many mortgages track. Recent research by Which? Money shows that a fifth of lenders have increased the rates on their SVR mortgages since the rate reached its all-time low of 0.5% in March 2009.

As a result, thousands are struggling. Seven in ten people are worried about mortgage rates, with 14% struggling with their repayments.

So what can you do if your mortgage is getting to much to handle.
Your first step should be to get a handle on where your money is going every month to see if there is a solution in cutting back or finding cheaper providers for everything from credit cards to electricity and broadband.

If you have already pared expenses to the bone, the next port of call is your mortgage lender. The Which? research found that just a third of people who are struggling with mortgage repayments have approached their lender for help. However, when they do, they will find their lender has a number of options. They can move customers from a repayment to interest-only mortgage, allow them a payment holiday or allow them to move to a different deal. And 78% of those who ask their lenders for help are offered some form of assistance.

This may only be a temporary respite, however. If your mortgage is proving a struggle it's well worth revisiting the bigger picture too. You cannot assume things will improve in the near future and you have to find a way to get back on your feet. This may mean you have to sell and downsize. It may mean looking for alternative sources of income, such as renting out a spare room. It may require any number of sacrifices.

However, your mortgage lender should give you the breathing space to let you take the necessary steps to get back on an even keel, so when rates rise next year they don't risk tipping you over the edge.
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