There is no avoiding it, prices have gone up and almost everyone is feeling the pinch. That said, it isn’t all doom and gloom. This will pass (it always has in the past) so rather than get too stuck in the present, let’s try to aim to the future.
6 things you can do to come out of a recession well.
When we are suddenly presented with rising inflation and interest rates, we all tend to shorten our outlook. There is a very good reason for this. We have been threatened with a clear, present, financial danger. That means we all need to stop and take stock of where we are financially right here and right now. So, it’s understandable that we shorten our focus.
There is a danger in focusing on ‘the now’ too much though. Recessions come and go, and the causes of financial problems cannot always be predicted. What we can say with some confidence though, is that these difficulties will pass. So here are a few things you can do that should help now, could make you more financially resilient if the crisis worsens and will help prepare for the better times to come.
Look for the hidden costs in plain sight
What I mean here are the regular payments for things that you don’t use or need. Often these are small costs that mount up. I know because I recently went through mine and noticed a monthly subscription, a payment for low-cost food deliveries, an app roll on cost and a membership to an online service. It wasn’t that I had forgotten about them as such, but I certainly hadn’t really worked out how much they were adding up to each month. They were £8, £5, £3 and £11 respectively. A total cost of £27 a month. My first response was ‘is that all? not a lot then’ Then I worked them out annually. They came to £324. Now I was getting really interested, so I went and looked at other services I really didn’t need. In the end I found just under £600 a year in half forgotten spending. The average mortgage payment in the UK is £753. I was spending nearly a full month mortgage repayment on things I didn’t need and barely remembered having. Not any more… I cancelled the lot.
Check your income protection and life insurance.
When we meet people looking for mortgage and other advice, we often need to discuss insurance. It is amazing how often a review of cost and suitability will produce some surprising financial benefits and still leave them with the same, or even better, protection. We should all review things like income protection and life insurance regularly but, as in point one, it’s understandable that we often don’t. A review won’t take long and may well be an eyeopener.
Can you switch to a fixed rate mortgage?
This is often a good option when interests are jumping around. There is always the possibility of the rates dropping again, but this way you will know what your cost is for an extended period of time. It’s a real benefit to budgeting and knowing where you stand, but you need the right deal. Call us and we will look at options for you.
Can you overpay?
If you are fortunate enough to be in a position where you still have some leeway in your finances, have you considered overpaying? I know this sounds counter-intuitive when budgets are being squeezed but, if you do still have spare income, paying more will reduce your interest over the lifetime of your mortgage. Also, if mortgage rates do rise again, you will be used to paying slightly extra which will soften the blow.
Can you do the utilities shuffle and stack?
Of all of the cost of living increases, utilities has hit the hardest. Not only do you need to make sure you are on the best deal, but I suggest you try looking at the companies that offer combined services to reduce overall costs. When you do this, don’t forget to check if they offer fringe benefits like discount cards and so on. These can all add up.
Is it possible to extend your mortgage term?
While I appreciate that means it will be longer before you fully own your home, if you have the option for a longer term, it could significantly reduce your payments. It’s not right for everyone though, so we need to talk it through.
As always, we are here to help so if you need advice on your mortgage or insurance, drop us a line or call us.