Mortgages have been in the news lately, and rising interest rates could have already affected how much you pay each month. Whether you’re on a variable rate or coming to the end of a fixed rate mortgage, find out what to do if your payments have become unaffordable.

Why is my mortgage going up?

Broadly speaking, banks and building societies set their mortgage interest rates based on how much it costs them to lend you the money to buy your home, plus some profit. 

When the Bank of England base rate rises, it costs the bank more to borrow the money which they use to offer you a mortgage. So, when it goes up, or your bank thinks it’s going to increase in the future, your interest rate can rise when you’re not on a fixed rate deal. 

For over 10 years the base rate was below 1%, so recent rises mean that if you’re outside of a fixed rate, you could be paying hundreds more than you’re used to for your mortgage each month.  

What is the Mortgage Charter?

Due to recent interest rate rises, the government and the FCA have asked mortgage providers to agree to a list of special measures to offer help to customers struggling to afford their mortgage payments. 

These include: 

• the option to switch to an interest-only mortgage for six months or extend the term of your mortgage to make payments more affordable. This is only available for customers who are up to date with their mortgage and not already in arrears.
• you’ll be able to lock in a fixed rate deal for when your current mortgage ends when there’s six months left on your deal. If a better rate with the same lender comes up before your current mortgage ends but after you’ve signed up for a new mortgage, you can take up that offer instead.  
• lenders won’t repossess your home within 12 months of your first missed payment.

To access this support, get in touch with your mortgage provider. 

What can I do if my mortgage provider hasn’t signed the charter?

There are some lenders who haven’t signed the Mortgage Charter, but 85% of UK mortgages are with lenders who have agreed to it. Even if your lender hasn’t signed up to the charter, all mortgage providers should offer you help if you can’t afford your mortgage payments. Get in touch with your lender before you miss a payment to find out your options. If you miss a payment on your mortgage, you could face extra fees, a mark on your credit file and it could even lead to having your home repossessed. 

How many times can you miss a mortgage payment?

You should avoid missing any mortgage payments. What happens if you miss one or two payments will depend on your lender, but there’s always other options to help you stay on track before it gets to that point. 

If you think you can’t afford to make your next mortgage payment, get in touch with your lender.  They will discuss your options and, depending on your circumstances, could offer to:

• move you onto an interest-only mortgage
• accept temporary reduced payments 
• offer a payment deferral (sometimes called a payment holiday)  
• extend your mortgage term so you pay over a longer period, reducing what you need to pay each month.

Talking to your lender can feel daunting but it won’t affect your credit file. However, some of the options your lender might offer you to make your monthly payments more affordable (known as ‘forbearance’) might be reflected on your file. Make sure you ask your lender what the impact might be if you choose any of these options. 

Even though some of these choices can increase the total costs you might pay over the total period of your mortgage, missing a payment can cost you more in the long run and possibly affect your credit. If your home is repossessed, you could lose the equity you’ve already paid for.  

If you’re worried that you might lose your home because of missed repayments, charities can provide support and advice, and there is plenty of help elsewhere too.

Visit the Shelter for more information on home repossession or the Housing Rights if you're in Northern Ireland. Your local council might also be able to offer support and advice.

Can I claim Support for Mortgage Interest (SMI)?

If you claim certain benefits you can apply for Support for Mortgage Interest (SMI). It’s paid as a loan which will need to be paid back when you sell or transfer ownership of your home. 

You can find out more about qualifying for SMI on our page about Support for Mortgage Interest. For some benefits you’ll need to have claimed them for as long as three months before you can apply for SMI. 

SMI is usually paid directly to your lender, and there is interest charged on the loan. There’s no limit to how long you can get SMI, and you can start repaying at any time if your circumstances change and you can afford repayments. 

When will mortgage rates change?

When your mortgage rate will change depends on what type of mortgage you have. 

If you’re on a variable rate mortgage, as soon as the Bank of England announce a rate change, your mortgage interest will go up or down too. With a fixed rate, interest rate changes only affect you when your deal is running out and you want to remortgage. You should contact your lender six months before your deal is set to expire and see what rate you might be able to transfer to when yours ends. Then you can compare this with other deals on the market to get the best rate. 

For people who are on the Standard Variable Rate (SVR) banks can change this at any time, but usually if the base rate goes up, your bank’s SVR will too.