Managing your mortgage payments to help with living costs

We can all fall on hard times. As the cost of living continues to rise, many households are worried about the impact this may have on their ability to maintain their mortgage payments.

We’re here to help with information on how you can reduce and manage your monthly payments.

Ways to reduce your monthly payments

Reduce or cancel any mortgage overpayments

If you’ve been making overpayments on your mortgage but are feeling the squeeze, you can reduce or cancel them for now and restart them when you’re ready. Just remember – you’ll still need to make your monthly payments on your mortgage.

Or, if you have savings available, you could consider using some of them to make a lump sum overpayment to bring down your monthly mortgage payments. If you do this, remember to give us a call so we can re-calculate your payments.

Extend your mortgage term

You may be able to reduce your mortgage payments by extending your term. While this means it’ll take longer to pay off your mortgage and increase the total interest you pay, it can reduce your monthly payments and ease some pressure in the short term.

If you have a first direct mortgage, you can do this at any time – you don’t need to wait until your existing rate ends to make a change to your term. It’s also worth noting that this has no impact on your current rate and could be agreed without an assessment of your circumstances. You can always reduce the length of your mortgage term in the future, this will be subject to assessment.

If you do decide to increase your mortgage term, know you still can make unlimited overpayments towards your mortgage.

Switch your mortgage rate

If you have a first direct mortgage, it’s really simple to switch your mortgage rate. You can book a new rate up to 6 months before your existing rate comes to an end.

And because we know you, there’s no need for any assessments or payslips. We don’t need to check your eligibility or credit score when you switch rates with us.

Most people with a fixed-rate mortgage wait until their current deal comes to an end to switch. If you choose to switch before your current rate ends, check what your early repayment charge (ERC) would be. This can help you decide if it’s worth moving to a new deal early, and whether the certainty you get by securing a new rate and term now outweighs any costs.

Remortgage

If you don’t have a mortgage with us, another option is to remortgage to first direct. You may find a lower interest rate, which could reduce your monthly repayments.

You can remortgage any time but, to avoid potential ERCs, people tend to consider remortgaging towards the end of their existing mortgage rate. We can provide an agreement in principle that lasts 6 months. Securing a rate before your existing deal comes to an end may help with future mortgage payments.

How interest rates could affect mortgages

If you have a fixed-rate mortgage, your monthly mortgage payments won’t change (even if the base rate does) – they’ll stay the same over your fixed-rate period.

It’s worth thinking about what to do when this period ends. If you don’t arrange another deal, you may be moved onto a standard variable rate (SVR), which could see your monthly payments go up.

It’s important to understand what your current rate is, and when it’s due to end, so you can prepare to switch your rate or remortgage before the fixed-rate period ends.

If you have a tracker mortgage

A tracker is a variable rate mortgage, usually linked to the Bank of England base rate This means your monthly payments can go up and down. A change in the base rate will affect the amount of interest you pay, and your total tracker mortgage payments. Use our interest rate change calculator to see how your payments could change.

If you’re a first direct customer and your mortgage is affected by a base rate change, we’ll always write to you to confirm your new interest rate and monthly mortgage payments.

Changing to a new mortgage deal, such as a fixed-rate mortgage, could give you peace of mind, knowing your payments will stay the same each month for a fixed period.

If you're on a standard variable rate (SVR)

Our Standard Variable Rate isn’t linked to the Bank of England Base Rate, or anything else. Instead, we set the rate ourselves.

The SVR is the rate of interest that’s usually charged once a fixed rate ends. The SVR is variable and can change, which means your monthly payments could go up or down.

If you’re on an SVR, you could be paying more than you need to, and it may not be the best option for you. If you’d like to switch your rate, or you’re not sure what to do – we can help.

Increasing your mortgage to repay other financial commitments

If you have equity in your home, you may be able to borrow against your property, through a secured loan. This could help you manage your outgoings by consolidating any other debts you might have, for example.

You don’t need to wait for your current deal to end before you can apply for this. But it’s really important to think this through carefully and understand how borrowing more against your home, especially to repay other debts, will affect your situation. You can call us any time to discuss your options and we’ll be happy to help.

With any form of borrowing, you need to be able to afford the repayments. Carefully consider your finances, how much you want to borrow and for how long. Keep in mind – the value of your home can also fall, which can leave you in negative equity, where you could owe more than your home is worth.

Some options may be better for you than others. For example, repaying your debts with a personal loan or switching to a new credit card might be more suitable.

Think carefully before securing other debts against your home. Your home may be repossessed if you don't keep up repayments on your mortgage.

Changing the date your monthly mortgage payment is due

You could rejig the date your monthly mortgage payment is due to help you manage your money better – as long as you make your payment each calendar month, that’s okay with us. For example, you might have changed employer and are now paid on a different date or just prefer a new date in the month that works for you.

If you have a first direct mortgage and are also a first direct 1st Account customer, you can change your standing order at any time by giving us a call on 03 456 100 100. If your mortgage payment is made via a different bank, please let us know first and then make a change to your standing order, so we know you want to change things.