SETTING FINANCIAL GOALS FOR THE NEW YEAR
UNDERSTANDING YOUR CURRENT MORTGAGE SITUATION
Before setting new goals, it’s crucial
to evaluate your current mortgage
situation. Are you on a fixed-rate or
variable-rate mortgage? How many
years are left on your mortgage? What
is the current interest rate, and how
does it compare to the market rates?
Answering these questions is the first
step in understanding where you stand
and what needs to be improved.
SETTING ACHIEVABLE MORTGAGE GOALS
Once you have a clear picture of your
current mortgage situation, it’s time to
set realistic goals. These could include:
Reducing the Mortgage Term: By
increasing your monthly payments, you
can shorten the mortgage term and
save on interest in the long run.
Switching to a Better Rate: Keep an eye
on the market trends. If interest rates are
dropping, consider remortgaging to a
better rate.
Overpaying Your Mortgage: If your
mortgage terms allow, overpayments
can significantly reduce the total
interest paid and shorten the mortgage
term.
Building a Mortgage Buffer: Aim to save
an amount equivalent to a few months
of mortgage payments. This can be
significant in financial emergencies.
Reviewing Mortgage Protection Insurance:
Ensure your insurance cover
is adequate, and consider updates or
changes if your circumstances have
changed.
While setting goals like reducing
mortgage terms or switching rates
can be beneficial, it’s important
to be aware of potential risks. For
example, remortgaging could come
with additional fees or penalties,
and switching to a variable rate can
lead to higher payments if interest
rates increase. Carefully weigh these
factors before making changes to your
mortgage.
CREATING A PERSONALISED MORTGAGE RESOLUTION PLAN
The new year is an ideal time to create
a personalised plan for your mortgage.
This plan should reflect your financial
situation, goals, and current economic
landscape. A well-structured plan can
help you stay focused, make informed
decisions, and adapt to any changes
in your circumstances or the wider
financial environment. Below is a
checklist to guide you through creating
a comprehensive mortgage resolution
plan:
Review Your Mortgage Terms and
Conditions:
- Understand your current mortgage
interest rate and terms. - Check for any penalties or
conditions on overpayments or
switching.
Assess Your Financial Situation:
- Analyse your monthly income and
expenditure.
-Calculate how much you can
realistically afford to overpay or save.
Market Research: - Stay informed about current
mortgage interest rates and trends. - Consider speaking to a financial
adviser for expert advice.
Remember, the mortgage market is
subject to variability. Strategies that
are effective today might need to be
adjusted tomorrow due to changing
economic conditions. It’s important to
remain flexible and responsive to market
trends, ensuring your mortgage strategy
continues to align with your financial
goals.
Set Clear Goals:
- Be specific about what you want to
achieve (e.g. reduce the mortgage
term by 5 years, save £5,000 for a
mortgage buffer).
Plan for Adjustments: - Prepare for potential changes
in interest rates or personal
circumstances. - Have a flexible approach to adjust
your goals as required.
Regular Review and Adaptation: - Schedule a bi-annual review of your
mortgage and financial situation. - Adapt your plan as needed based
on your reviews.
THE ECONOMIC LANDSCAPE AND MORTGAGE TRENDS
Understanding Inflation and Interest Rates:
Inflation is a key economic indicator that
can directly impact mortgage rates.
During 2023, the UK experienced a
significant shift in inflation rates. In
October, the inflation rate was recorded
at 4.6%, a decline from the previous two
months’ rate of 6.7% [2]. This variance in
inflation plays a substantial role in how
lenders determine mortgage interest
rates. When inflation changes, interest
rates often reflect the increase or
decrease.
Understanding and keeping on top
of these trends is vital for effectively
planning and managing your mortgage
in the current economic climate. It
highlights the importance of regularly
reviewing your mortgage arrangements
and considering fixed-rate options or
overpayments to mitigate the impact of
fluctuating interest rates.
The economic climate can dramatically
influence mortgage strategies. For
instance, in a potential recession, you
might prioritise securing a fixed-rate
mortgage to guard against rising rates,
while continued inflation might require
different approaches, such as building a
larger mortgage buffer.
Government Policies and Interventions:
Government policies, such as changes
in stamp duty, housing subsidies, or
mortgage relief programs, can also
impact the housing market. These
policies can make buying a home more
affordable or, in some cases, lead to
increased demand and higher prices. A
notable example is the Stamp Duty Land
Tax (SDLT) reliefs, part of the Growth
Plan 2022, which will end on 31 March
2025 [3]. Without further stamp duty
relief implemented in the 2023 Autumn
Budget, the end of these reliefs may
have an impact on the housing market
and potentially affect decisions related
to buying or selling properties.
In a world of economic uncertainties,
setting and achieving mortgage-related
financial goals in the New Year is more
important than ever. By understanding
the broader economic context, making
informed decisions, and preparing for
future changes, you can navigate the
mortgage landscape competently and
set the stage for long-term stability.
Effective mortgage planning is an
integral part of personal finance
management. Aligning your mortgage
goals with your financial objectives,
such as retirement planning or savings,
ensures a comprehensive approach to
financial stability and long-term success.
Remember that you don’t have to
navigate your mortgages alone. Our
team of expert advisers are here to
provide personalised, tailored advice
that aligns with your unique financial
situation and goals. Whether it’s fine-
tuning your mortgage plan, exploring
new opportunities, or simply seeking
reassurance, we’re here to guide you
every step of the way. Contact us today
to turn your 2024 mortgage resolutions
into reality.
YOUR HOME MAY BE REPOSSESSED IF
YOU DO NOT KEEP UP REPAYMENTS
ON YOUR MORTGAGE.
SOURCE DATA:
[1] Financial Conduct Authority (FCA)Commentary on Mortgage lending
statistics Q2 2023.
[2] Statista – Inflation rate for the
Consumer Price Index (CPI) in the United
Kingdom from January 1989 to October
2023.
[3] Gov.uk – Stamp Duty Land Tax —
temporary increase to thresholds.
Image – Pixabay
