Inflation has hit an almost 30-year high and is expected to shoot higher when increased energy costs set in from April.
Brokers can help ease the squeeze on household finances by cutting mortgage costs for homeowners.
Sonya Matharu, senior mortgage broker at The Mortgage Mum, said many of her customers are those remortgaging to secure better deals.
She said: “With the rates being low, I have even helped clients remortgage early out of their fixed rate deal and although we have had to factor in an early repayment charge, the savings actually made it worth it, as well as the peace of mind it bought to the client…
“It’s never been more important to spend time on the budget planner with our clients. The rising cost of living will need to be factored in so that they can enjoy a lifestyle that feels comfortable, as well as the purchase of a property.”
Getting a mortgage could become tougher
Many lenders rely on data from the Office for National Statistics (ONS) when calculating borrower affordability.
Therefore, it could be more difficult for borrowers to qualify for deals as living costs rise further, particularly those already close to cut-off lines.
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said: “Cost of living increases have, as far as I can tell currently, not impacted affordability calculations. However, they will.
“The vast majority of lenders calculations use ONS data, so as this data is updated with increases, maybe early summer, I’m expecting this to have an effect…
“Getting a feel for which lenders calculations are more generous in which circumstances is part of the dark art of being a mortgage broker.”
Imran Hussain, director at adviser Harmony Financial Services, added: “Mortgage lenders have always scrutinised outgoings, especially credit commitments, and or childcare commitments.
“But one thing that will play a big factor going forward will be the cost of living as lenders tend to rely on ONS data and this will impact borrowing for those on lower incomes, especially if the cost of utilities spirals out of control. Lenders will have no choice but to consider this in the short-term until [bills] are brought back under control.”
Higher interest rates compound cost of living pressure
Rising interest rates on top of higher living costs, provide a further incentive to remortgage sooner rather than later.
Graham Cox, director at Hub FS, said: “In isolation, the £700 a year average increase in energy bills from April will not be a huge factor when lenders assess affordability.
“However, there are three other factors at play. Food and petrol prices have risen dramatically, National Insurance is about to go up, and the Bank of England has increased the base rate twice in three months…
“When you put all that together, it’s likely getting a mortgage will become much tougher.”
However, advisers aren’t expecting higher living costs to slow down the market. But technology market tools may be more valuable, according to Rhys Schofield, managing director at Peak Mortgages and Protection.
He said: “Tools that do multiple affordability calculators at once, such as affordability hub, are just going to be even more valuable and any broker not using these risks working with one hand tied behind their back.”
