Mortgage clinic: ‘Since I listed my flat for sale my mortgage payments have increased by £300 a month — what can I do?’

Helen Hambly’s fixed-rate deal ended last year and, as she is selling her flat, she didn’t take out a new one (Matt Writtle)
Helen Hambly’s fixed-rate deal ended last year and, as she is selling her flat, she didn’t take out a new one (Matt Writtle)

Helen Hambly, 36, works for a media agency and is in the process of trying to sell her studio flat in Blackheath so she can move in with her partner and his two children.

“I’ve done the flat up myself with a new bathroom, kitchen and pull-out bed to maximise the space. It’s two minutes from Greenwich Park but, post-lockdown, studio flats are harder to sell.”

Helen has had two buyers fall through and the flat has now been on the market for over a year, so she’s reduced the price by £10,000 to £240,000.

“I feel like I followed all the rules and saved to get myself on the property ladder and now I’ve come to sell, and I can’t.”

As well as preventing Helen from moving on with her plans, this delay is costing her a significant amount of money. Her low fixed-rate mortgage came to an end a year ago and, as she was selling, she didn’t sign up to a new deal but went on to the lender’s Standard Variable Rate.

Since the Mini Budget, her interest rate has almost tripled, increasing her monthly mortgage payments by around £300. “With bills, too, I’m spending £1,500 a month when I could be saving that towards a new home. I’d like to know if there is anything I can do to reduce my monthly mortgage payments while I continue to try and sell.”

The details

  • Price paid for studio flat in August 2017: £216,500

  • Previous mortgage rate: 2.1%

  • Previous monthly repayments: £775

  • Current mortgage rate: 6.25%

  • Currently monthly repayments: Over £1,000

  • Mortgage balance: £142,000

The advice

Simon Gammon, Managing Partner at Knight Frank Finance, says:

Firstly, I’d recommend Helen checks with her existing lender to see what it will offer on a variable rate product. It will be cheaper than the lender’s Standard Variable Rate and will carry no penalty, so, when Helen does find a buyer, she’ll be able to sell without incurring a charge. However, Helen should be careful to check whether the lender charges an arrangement fee for taking a new product.

If Helen’s existing lender doesn’t have a suitable option, she could look at remortgaging. Some lenders do offer fee-free remortgaging, and again I would recommend moving on to a tracker mortgage with no early repayment charges. The saving Helen enjoys as a result will depend on how long it takes her to sell, but she will see a drop in monthly outgoings. That drop will come through much sooner if Helen stays with her existing lender, and I would recommend she acts now rather than waiting for a buyer.

Felicity Holloway, head of mortgages at Moneybox:

The situation Helen finds herself in is not uncommon and can depend on the type of property and its location. Trying to match up a property sale with when your mortgage deal ends is tricky and can lead to some expensive months on the bank’s Standard Variable Rate.

Ideally at this stage Helen would look for a buyer who is not in a chain to reduce the risk of a further sale being halted. She has options regarding the mortgage: firstly, she could renegotiate the current rate. Some fixed-rate deals have an early repayment charge (ERC) that Helen would have to pay if she entered into a new fixed-rate mortgage and then sold the flat.

However, there are more flexible products available with no ERCs that may offer Helen a lower rate, bringing down monthly outgoings. Overall, rates are higher now than when she agreed her previous 2.1 per cent deal. However, I would recommend she discusses her situation with a mortgage broker who can assess the whole market and recommend an alternative to her.

You should seek independent advice from a qualified professional before acting upon any information contained in this article