This lunchtime a further rate increase in the interest rates was announced by the Bank of England taking rates to 5 %, the highest they have been in 15 years since 2008.
For anyone with a mortgage this is a worrying time, especially if your mortgage rate is variable or your fixed rate is coming to an end, For those in the middle of separating and/or divorce and are yet to settle their matrimonial finances, this will be adding a significant added pressure.
If you are one of those in the middle of divorce or separation and your fixed rate has ended or is about to end, then it is really important that you take advice from your family solicitor, and take independent financial advice as to the options available to you.
Below are a few points to consider if you are in this situation :
- If you are planning to sell the property, but your fixed rate is about to end. If you fix now you would likely incur an early redemption penalty when the mortgage is redeemed on sale. You may therefore wish to explore whether one party could port the mortgage to another property in their own name. If that isn’t an option you will need to plan how in the short term you will pay the additional monthly payments if re-fixing is not going to be financially affordable due to a penalty
- If your fixed rate has already come to an end and you cannot agree to re-fix, it is important that you liaise with your ex-partner to agree how the additional monthly payments will be met. Likewise, if you do agree to re fix you will also have to agree how the additional payments will be met, as all new fixed rates are almost certainly higher than they were 1 2 or 5 years ago..
- In the short term you may want to explore if the mortgage could be put onto an interest only basis, or extend the term.
- In the longer term, when you are looking at what your matrimonial settlement will look like, and what is affordable for you, you should explore if any mortgage capacity you had calculated say 6 -12 months ago is still realistic and affordable. Will you need more capital to take into account the affordability of borrowing.
- If you are already divorced, you may have agreed finances some time, but rely on your ex-partner for financial assistance by way of “spousal maintenance”. If that is the case but due to the exceptional increase in costs of living and now with increasing hike in interest rates you may want to take advice as to whether the amount you receive can be varied if you are really struggling.
The most important step to take as soon as possible is to take both legal and financial advice, to be reassured and to negotiate a plan and to factor in the changes to ensure that your financial settlement is fair, reasonable, affordable, and realistic for all parties.
If you require any advice regarding these issues please do not hesitate to contact our team at BH&O who will be happy to help.
Helen Bishop, Consultant Solicitor