Facing your financial fears
Are you worried about how to keep costs down as mortgage repayments climb this year? Your Mortgage provides some budgeting tips
Suspicious sorts might think all things financial seem to be conspiring against them at the moment. On top of a general tightening of criteria by mortgage lenders (and even credit card providers in some instances) thanks to the credit crunch it seems that the general cost of living will continue to rise throughout 2008.
We have already examined the prices hikes implemented early this year by some of the UK’s major energy providers on our sister site yourmoney.com (and also in the magazine, on sale now), but there are a range of other rising expenses to take account of now too.
Increasing costs
Recent research conducted by the Centre for Economics and Business Research on behalf of Asda has found the average cost of living in the UK is currently 4.9% more than it was this time last year – that equates to £5 more per week that must to be spent on essentials such as transport and food. A mere £5 may not seem like a lot, but it adds up over the course of a year to £260. It’s also an average, so the extra costs could be a lot more than £5 for some households.
This figure is also in addition to any potential increases in mortgage repayments the average household may incur this year. UK watchdog, the Financial Services Authority (FSA) launched a £2m advertising campaign this week targeting the one-in-five mortgage borrowers concerned about meeting their repayments over the next 12 months. Apparently, a quarter of this group have no idea how they will meet this particular cost in coming months. This is particularly when you consider that the FSA believes 1.4 million short-term fixed rate mortgages are due to come to an end this year. Such borrowers could find themselves in a higher-interest rate environment and facing lenders’ restrictions when it comes to remortgaging in 2008.
Don’t panic!
If you think you may struggle to make your mortgage repayments this year, there are a number of things to do that could ease the situation – and none of them involve panicking:
1) Contact your lender: We say this time and again at Your Mortgage, but it cannot be stressed enough that you should contact your lender as soon as you foresee any problems. They don’t want you to fall behind with your payments, any more than you do yourself, so lenders usually endeavour to help you find a solution, if possible.
2) Get extra help: There are a number of organisations that have been set up to provide impartial advice to those experiencing financial difficulties, including Citizen’s Advice and the Consumer Credit Counselling Service. The FSA also has a website with some tools that may be of use.
3) Consider insurance: If you haven’t covered your mortgage repayments or your income, you should think about getting some insurance. If you are struggling under normal circumstances, an unforeseen problem (illness or redundancy, for example) may well tip you over the edge. Click here for more information on mortgage payment protection insurance (MPPI) or income protection.
4) Sort out your budget: sit down and look at your income and all of your outgoings, making sure the former outweighs the latter of course. Divide the outgoings into essential items (such as mortgage repayments, council tax and food bills) and non-essentials, for example gym membership and meals out. Be brutal – is there anything you could cut down on?
Burying your head in the sand when it comes to your finances is a risky game. Accepting any problems – potential or actual – as soon as they become apparent is the only sensible way forward.
Pauline McCallion is editor of Your Mortgage and Your Money magazines
Tags: cost of living, criteria, financial, help, mortgage, repayments
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