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In a major boost for borrowers, two banks have announced they will be cutting mortgage rates. This comes as welcome news for those struggling with the increasing cost of homeownership.
According to data from the Institute for Fiscal Studies (IFS), as many as 320,000 people have been pushed into poverty due to soaring mortgage rates. In 2022/23, the average mortgage rate was around 2.3%, resulting in interest payments of £240 per month for a household with a typical outstanding mortgage. However, by the end of last year, a tenth of households faced a mortgage interest rate of at least 4.7%, equivalent to £490 per month.
The IFS also found that mortgage rate rises have pushed some adults into financial hardship, with borrowers remortgaging in 2022 more likely to fall into arrears on bills than those who had not remortgaged.
To combat the impact of rising mortgage rates, it’s important for individuals to understand their financial options. This is where equity comes into play. But what exactly is equity and how can it be used to protect savings from interest rate cuts?
Equity is the value of an asset after all debts and liabilities have been deducted. In simpler terms, it is the difference between what a person owns and what they owe. For homeowners, equity is the value of their house minus any outstanding mortgage payments.
One way to use equity to protect savings from interest rate cuts is by refinancing a mortgage. By refinancing, borrowers can potentially lower their interest rate and save money on monthly payments. This can also help prevent falling into arrears on bills, as highlighted by the IFS.
On the other hand, individuals can also tap into their home equity through a home equity loan or line of credit. This allows them to borrow against the value of their home and use the funds for various purposes, such as consolidating debt or making home improvements.
The IFS report also brings attention to the issue of poverty in relation to inflation. As the cost of living continues to rise, it’s crucial for policymakers to understand the true extent of poverty and take necessary actions to support those who are struggling.
In other news, a family of four from Peterborough has won £1 million on the National Lottery after playing the same numbers for 30 years. The syndicate, made up of Audrey Cobb, her three children David Cobb, Carol Nobbs, and Sandra Digby, will each bank £250,000.
The group had been playing the same numbers since forming their syndicate in 1994 and finally had their lucky moment. David’s wife Linda was the one to discover the win after checking the National Lottery app the morning after the draw.
The family has already made plans for the money, with Carol using her share to purchase a new home after a tough few years. Sandra plans to treat herself to a new car, while David and his mother are still undecided on their purchases but have made it a priority to ensure the family benefits from the win.
It’s a heartwarming story of a long-awaited win bringing financial security and stability to a loving family.
