What could a recession mean for mortgages? “Fixed Rate Clients Could Struggle” | Personal finance | Finance

Ms Spencer said: ‘These clients may be forced to bite the bullet and re-mortgage as soon as possible.

But those with variable rate mortgages “will see their payments increase immediately”, even the smallest change in interest rates will “trigger another increase in their biggest monthly expense”.

There is naturally more concern for those with adjustable rate mortgages, who will see a rise in line with interest rates.

Sarah Thompson, Managing Director, LRG: “[Variable mortgage rates] will have been stress tested by brokers who would lend based on the impact of rising interest rates on someone’s ability to repay.

“Homeowners shouldn’t worry about an interest rate beyond their control.

“It will rise, but it is not and will not approach the historic highs of decades ago. A reassessment of spending, especially with the rising cost of everything else, will be a good safety measure in the face of such insecurity.

Is there a way to lessen the hard impact?

As overwhelming as it may seem right now, there are steps you can take to stay afloat.

Ms Spencer said: ‘Lenders have provisions in place to help borrowers cope with economic hardship, including job loss or reduced income. For example, during the pandemic, lenders offered all customers the option of a payment holiday, regardless of their financial situation.

“Lenders are no longer required to stress test borrowers’ finances, but lenders still bear the risk and so I suspect many will continue to stress test their borrowers.

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