Home > Problems > Effect of a Recession on Mortgage Repayments

Effect of a Recession on Mortgage Repayments

By: Jack Claridge - Updated: 14 Oct 2012 | comments*Discuss
Effect Of A Recession On Mortgage Repayments

Every government strives hard to avoid the effects of a recession on the population and in particular that part of the population who are home owners. Home owners often are among the first to suffer when interest rates rise or changes happen with inflation rates. So much so that mention of a recession can often turn a thriving housing market into a depressive state until such times as industry pulls through.

Mortgage Repayments

As we have already mentioned home owners often bear the brunt of a recession and as such find that meeting mortgage repayments becomes difficult. This happens because substantial numbers of jobs are nearly always lost during a recession and those individuals left in work find that pay increases are frozen until such times as the situation improves.

The Benefits of a Fixed Rate Mortgage

For those home owners fortunate enough to have a fixed rate mortgage (and the number is perhaps not as high as you might think) there is some comfort to be had as with a fixed rate mortgage the rates can only increase once a certain period of time has passed. For example some fixed rate mortgages may be fixed for three or five years within which time interest rates may rise but the mortgage repayments stay the same.

The Disadvantages of not having a Fixed Rated Mortgage

Having a flexible interest rate on a mortgage especially in a recession can lead to many home owners falling into debt as interest rates and mortgage repayments rise and salaries stay static. During a recession it is usual for the number of repossessions to rise and also the number of unemployed.

How to Safeguard Yourself in a Recession?

In order to protect yourself and your home in a recession it is necessary to think ahead and make decisions whilst times are good. This may sound like something that is common sense but it is unfortunately something that a lot of home owners do not take seriously.

When times are good, disposable income is high and house prices are at a premium home owners can take advantage of many different offers. It is wise where possible to put what money you can aside to help compensate for the down turn when it eventually arrives.

When times are good it is a worthwhile investment of your time to look at transferring your mortgage especially if it is a variable rated mortgage. Moving from a variable rate to a fixed rate when the housing market is stable ensures that when things take a turn for the worst financially you still have some money to fall back on rather than having to sacrifice more of your income to pay additional interest.

Payment Protection

Taking out some cover on your mortgage repayments is also a good idea. For a monthly repayment you can safeguard yourself for a period of time against job loss or illness which allows for the mortgage on your home to be paid leaving you to concern yourself with finding a new job or to get better if you are ill.

Further Information

Where possible you should seek the advice of an independent financial advisor; make sure they are independent and not tied in to any one particular mortgage company or financial group. This means you will receive the best and most impartial advice on offer and will be offered the best financial solution to your own needs.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

(never shown)
(never shown)
(never shown)
(never shown)
Enter word:
Latest Comments
  • ste
    Re: The Right to Acquire Scheme
    right to acquire exempt from right to acquire rural area yet the have sold house to next door less then 2yrs agar
    6 December 2019
  • Shaz
    Re: Are You Classed as a Key Worker?
    I am a key worker in milton keynes, where can i find key workers properties and how can i apply for them?
    3 December 2019
  • bhavin
    Re: What Are My Responsibilities Under Shared Ownership
    I had burglary in my flat which is road side ground floor . The main door lock has broke and i have…
    2 December 2019
  • gilly
    Re: Selling Your Shared Ownership Property
    Hi I just read your article and I have shared ownership with Fortis Living and your article says that the Housing…
    28 November 2019
  • Kezza
    Re: Buying Your Council House
    Hi Im just after some advice me and my partner and our 3 kids live with my partners mum in her council house who has just been offered…
    8 November 2019
  • Keith
    Re: The Right to Acquire Scheme
    After being told for 3 years that I can apply for a right to acquire, I'm now being told I can't, on the designated rural area in…
    7 November 2019
  • Lnm_86
    Re: The Right to Acquire Scheme
    I have been a housing association tenant for 11 years, 9 of these were with one association and 2 years with another (Still with…
    5 November 2019
  • Tim
    Re: The Right to Acquire Scheme
    Hi there, Thank you for giving us a chance to ask questions with regards to affordable housing. I want to buy a house with the…
    1 November 2019
  • Sunjam
    Re: The Right to Acquire Scheme
    I have lived in this property for almost 11yrs now. I have notified my landlord of my interest to buy the property under Preserved…
    31 October 2019
  • Bash.
    Re: Housing Association Properties
    I am currently living with my parents in a Te'o bed ground floor disable flat with my 3yr old daughter and my Nephew. My 23yr…
    28 October 2019