Mortgage stress: The signs to watch out for

When mortgage rates are high, it’s more important than ever to recognise the signs of mortgage stress and find effective solutions. Higher rates can strain your finances, making it crucial to understand what mortgage stress is, its warning signs, and how to avoid it. Read on to learn more. 

What is mortgage stress?

Mortgage stress happens when your mortgage repayments take up a significant portion of your income, making it difficult to cover other essential expenses. The higher the interest rates, the more likely you are to experience mortgage stress, as your repayments may become increasingly challenging to manage. 

Recognising the signs

Identifying the signs of mortgage stress early on could help you address the issue before it becomes unmanageable. These signs include:

  • Living paycheck to paycheck and being unable to budget for unexpected expenses, such as a medical bill or car service
  • Withdrawing from social activities that cost a fee, whether that’s activities of your own or your dependents
  • Relying on asking friends and family for assistance, using credit cards, or taking out personal loans from the bank.

By being aware of these signs, you can take prompt action to manage your situation effectively. 

So, what can you do about it?

There are several steps you can take to alleviate or prevent mortgage stress, including:

  • Reach out to your lender

One of the most critical steps in managing mortgage stress is having an open conversation with your lender. If you’re struggling with mortgage repayments, the very first thing to do is to inform your lender of your situation and explore available options like payment holidays or other relief measures. Lenders appreciate proactive borrowers and are often willing to work with you to find a solution. So, make sure you get in touch with the lender as soon as possible, preferably before there is a major problem, like falling into arrears.

  • Seek professional guidance

If you’re finding it challenging to stay on top of your mortgage payments, it can be a good idea to reach out to a mortgage adviser like us, who can help you review your mortgage structure, or a financial adviser for broader budgeting assistance. Seeking professional guidance can make a big difference when it comes to finding solutions for your unique circumstances. 

  • Review and adjust your budget

It always starts with budgeting. Assess your income and outgoings to identify areas where you can cut back on spending. Even when the budget is tight, there may be areas where you can reduce discretionary expenses and prioritise essentials, hopefully making it easier to meet your mortgage repayments. Remember, even small changes can have a significant impact on your financial stability. 

  • Consider extra income or downsizing

If possible, explore options for additional work or a side hustle to boost your income. Alternatively, consider downsizing to a more affordable property to reduce your mortgage balance and repayments and relieve financial stress, keeping in mind that property prices have fluctuated significantly in recent years. The suitability of this option depends on factors like when you bought your home and what your property is worth compared to buying another property in the same market. 

  • Build and maintain an emergency fund

Strengthening your savings is crucial, even when there seems to be nothing left to save. Establishing an emergency fund can provide a key financial safety net for unexpected expenses or changes in financial circumstances. You don’t have to start big: even small amounts, saved regularly, can gradually build your emergency fund to cover several months’ worth of living expenses.

  • Stay informed and educated

Don’t forget to keep yourself informed about the latest trends in the housing market and mortgage landscape. Understanding how these trends may impact your mortgage can help you make better decisions and manage your financial stress proactively. And that’s why we’re here: feel free to contact us anytime if you have any questions at all. 

Here to help

Navigating mortgage stress in a high-rate environment can be challenging, but we’re here to help. As a mortgage adviser, we can assess your situation and help you consider options to manage your mortgage with confidence. 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.