Inflation is expected to reach 6% this year, with energy bills predicted to rise by as much as £600 a year when the new energy price cap comes into effect from April. Households will also face higher National Insurance costs that month, along with higher council tax bills.
Although there’s little any of us can do about most rising living costs, it may be possible to reduce what’s likely to be your biggest monthly outgoing – your mortgage. Typical monthly mortgage payments are just over £800, at least seven times the £112 that typical monthly gas and electricity bills cost.
Energy bills are expected to rise by 50% in coming months, but reducing your monthly mortgage costs could more than wipe out these increases, depending on the size of your mortgage and the rate you’re currently on.
For example, according to calculations by L&C Mortgages, remortgaging from an average Standard Variable Rate of the biggest UK lenders to a leading fixed rate could save customers over £2,200 per annum on a typical mortgage. Cutting rates by just 0.65% could offset the anticipated potential £600 annual increase. You can check your lender’s SVR and see whether they have raised it in recent weeks using L&C’s SVR Watch tool.
Fix for peace of mindIf you’re considering remortgaging and are worried about interest rates rising further this year following December’s increase, you may want to consider a fixed rate deal. This type of mortgage can provide valuable peace of mind that your rate and monthly payments won’t change during the fixed rate term, regardless of what happens to interest rates.
David Hollingworth from L&C Mortgages said: “Fixed rate mortgages offer a chance to save thousands for those that have drifted onto a lender’s Standard Variable Rate. Cutting the biggest household bill could offer savings that mitigate the inevitable increase in other costs but also gives the chance to shelter payments from any further interest rate rises.”
L&C has launched a new, enhanced online mortgage finder to show potential savings from switching deal with new or existing lender. You can check the savings you might be able to make here.