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What could a recession mean for mortgages? ‘Fixed-rate customers could struggle’ | Personal Finance | Finance


Ms Spencer said: “These customers may be forced to bite the bullet and remortgage sooner rather than later.”

But those with variable rate mortgages will be “seeing their payments increase immediately”, with even the smallest change to interest rates “triggering another rise in their biggest monthly outgoing.”

There’s understandably more concern for those on variable 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 how an interest rate rise will affect someone’s ability to repay.

“Homeowners shouldn’t worry about an interest rate that is out of their control.

“It will rise, but it isn’t and won’t come close to the historic rises of decades ago. A reassessment of outgoings, particularly with the cost of everything else rising will be a good safety measure in the face of such insecurity.”

Is there a way to mitigate hard impact?

As damning as it might currently sound, there are measures you can take to stay afloat.

Ms Spencer said: “Lenders do have provisions in place to help borrowers cope with economic struggles including job losses 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, however, lenders still hold the risk and so I suspect many will still be stress testing their borrowers.


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