As the Bank of England announces mortgage holders "may struggle with repayments" set to rise for nearly 1 million people over the next three years, a Christian financial advisor shares how we can prepare for the future.
It has been estimated that around a million households with a fixed-rate mortgage will have seen monthly repayments go up by about £500 by 2026, following a report into the stability of the sector.
The Bank of England says higher interest rates are gradually filtering through to homeowners with 4-and-a-half million already being impacted by the rise.
Interest rates, which were at 0.1 per cent in December 2021, have continued to rise in an effort to combat inflation. Last month the base rate was lifted to 5 per cent. Expectations that borrowing costs could continue to rise has pushed up mortgage rates.
Christian financial advisor Ron Mbakwe tells Premier it's not all bad news: "What is slightly better than previous situations like this is that a lot of people are on fixed-rate mortgages, so that impact is delayed. It will still come but it would have been worse if everyone was on a variable rate mortgage and it just jumped up. The fixed rate mortgage means that it is spread between now and 2026 when repayment terms come to an end."
Labour's deputy leader Angela Rayner told MP's on Wednesday that the news is a 'bombshell' for struggling families as soaring bills, low wages and the cost of living push them to the brink.
Deputy Prime Minister Oliver Dowden has insisted Russia's invasion of Ukraine and post-Covid supply chain issues are at the heart of rising inflation.
The Bank of England insists that the number of households with high mortgage burdens compared to their incomes remains well below the 2008 peak, but warns that over two million households will pay between £200 and £499 more per month over the next three and a half years, while a further one million mortgage holders will see their monthly payments rise by at least £500.
Mbakwe advises people who are concerned about the rise to be proactive: "It's very good that it is spread out between now and 2026. We can plan for when that rise will come, so that gives us the option to budget appropriately. We can think 'I know it's coming in the next year or 18 months, how can I plan my finances accordingly and what can I do to increase my personal earning potential?' You can spend less but also earn more money, so think, 'How can I increase earning potential over the next year and a half?' as well."
Mbakwe explains that the Bank of England is working with the Financial Conduct Authority (FCA) to support the most impacted: "There will be options for people who are stuck. If somebody does get into a difficult situation, do not hide, contact the Bank. Let them know. They are obliged to treat you fairly they will find a solution because they do not want to reposess people's houses."
Ultimately, Mbakwe encourages Christians to trust in God and pray for peace amid financial instability, provision from God and for the health and healing of our economy.