Why Borrowers Lose Affordability When Mortgage Rates Increase

Modern day financial instruments might have facilitated in fulfilling one’s financial needs but at the same being more careful in selecting what method to use in overcoming one’s monetary need, has never been more important. One of the most widely used methods is a mortgage. Mortgages are complex financial instruments which need careful deliberation before opting for them. Therefore, getting an unbiased and expert help can save you from years of suffering. Taking a loan or a mortgage is not the difficult part. What comes next is the bigger question. Maintaining the equilibrium between both is crucial. Many people fail to maintain this and thus get caught up in the pitfall that surrounds mortgages and loans.


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Mortgage rates are very critical in deciding whether the mortgage is currently affordable for you and will it continue to be like this with possible fluctuations in coming time. It is important to know that what a mortgage rates rise would mean for borrowers. While high interest rates are beneficial for savers, resulting in higher returns on their savings, it is not the same case for borrowers.  In previous years when the mortgage rates were considerably at rock-bottom levels, homebuyers and those looking for remortgage have benefited hugely which made owning a home much more affordable.

The direct hit for increasing mortgage rates is taken by the borrowers. The decision to which home to buy and when is likely to be affected by the fluctuating mortgage rates. The equation is simple – the higher the mortgage rate, higher will be the monthly payments. Thus lowering the borrowers’ affordability for buying the property. This has a direct impact on the borrowers’ debt – to – income requirements. Some of the purchasers might go for a smaller home while other might have to let go of their dream of owning their own home.

The borrowers who plan to take a refinancing on their current mortgage might no longer be able to choose this due to higher monthly payments. In such case paying out the debt earlier is a wise option. People who go for variable mortgage rates can experience an increasing monthly mortgage cost owning to increase in higher interest rates. When it comes to home loans, Standard Variable Rate (SVR) is more widely used. That means if you are currently paying your lender on SVR basis, chances are you are already paying much more than you need to.

According to a recent research over a third (36%) of homeowners are still on SVR and paying a good amount of extra money by just going for the wrong mortgage deal. Such consumers are better to select fixed rate mortgages with this type of mortgage; your interest rates remain the same for a certain period of time thus keeping you safe from mortgage rates fluctuations. With an increase in mortgage rates, house price growth starts to decline due to an increase in the cost of owning a property. Higher mortgage and interest rates are likely to impact borrowing costs as well such as personal loans and credit card finances.

Working together with a mortgage expert can secure your financials and help you chose the right type of mortgage or home loan you need.  Creditzone is not just a UAE based brokerage house but is also an unbiased and expert platform where your mortgage needs can be efficiently managed. With its easy to use mortgage calculator, you can get an idea of the real scenario of the financial market without having to pay. This free of cost assessment can make a huge difference for your future.  Whether you want to move your mortgage to a better bank with better rates or you want to decide what to do with your savings, Creditzine is there to assist you in making an informed decision. Creditzone is your best option, in contrast to other local brokerage houses like Home Matters or mortgage house UAE, to get home loans or manage your current debt solution especially if you are non- resident in Dubai.

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