The cost-of-living crisis is forcing people to make difficult financial decisions. Those on their first mortgage may well have limited household budgets and be feeling the pinch. Gordon Reid looks at how you – as a mortgage adviser – can help them make ends meet.
Most customers who took out their first mortgage in the last couple of years will be sighing with relief if they chose a fixed deal. That offers them some protection. But when they planned their budgets and considered their outgoings, they won’t have foreseen dramatic price increases in fuel, transport, taxes, food and other day-to-day expenses.
As a mortgage adviser, you’ll have helped many borrowers secure their homes, and may even have helped them prepare their budgets. Perhaps this included a ‘plan b’ in case something went wrong.
That means, even if their mortgage payments don’t increase, they may still look to you for help. But given that borrowing more against their mortgage is unlikely to be an option or prudent, what can you do to help?
Refer them to their mortgage lender
Even though the mortgage debt may not be the cause of their financial issues, for most new borrowers, it will still represent their biggest monthly outgoing.
This also means that, potentially, it’s where the greatest flexibility exists – and where the biggest savings can be made. What the lender can do will depend on individual circumstances, but may include extending the term of the mortgage, and temporarily suspending some or all of the capital repayments.
With any of these options, the borrower must be made aware of the long-term implications, including:
- increasing indebtedness
- more interest being charged, and
- payments being due for longer.
Help them revisit their budget
You’re not a debt counsellor, but there’s no reason why you can’t ask questions to help them find solutions for themselves.
You don’t need to, and indeed shouldn’t, offer advice. But, by asking the right questions, you can help them prioritise – whether that’s identifying what they can give up, or highlighting the biggest issues they need to address.
Suggest they talk to their creditors and providers
If your customers are struggling with debts – such as loans, fuel bills, council tax or even their 18-month contract with Sky – encourage them to talk to their providers.
Many companies would prefer to reach an agreement with their customers, rather than wait to hear from them when they are already in arrears. But your customers may need reassuring that this is the right course of action.
Refer them to organisations who can provide support
There are lots of organisations who can provide advice and guidance. Even if you are simply a conduit to these, you will be providing your customers with an invaluable service. For example, Citizens Advice provide a comprehensive guide on what to do if you’re struggling with your costs of living.
Many other groups provide free debt advice and debt management, including:
Interestingly, the latter two are funded by the credit industry, itself.
Your customers may also be entitled to benefits, allowances or tax deductions, which could help their situation.
Extra customer service
A lot of this will sound like going out of your way and nothing to do with your role. But if you can help your customers at a time of crisis, they’ll value your willingness to support them and they’ll never forget it.
And when it comes to renewing or taking out their next mortgage, guess who they’ll trust with their affairs?
See our qualifications in mortgage advice