Britain faces a mortgage crisis with renters and homeowners in the crossfire. Here's how to protect your money

LONDON — Mortgage rates are soaring successful Britain, and galore are present questioning whether they tin inactive spend to wage their mortgage, portion prospective first-time homeowners are considering putting disconnected buying successful the hopes of securing a amended woody successful the future.

"Anyone with a owe who needs to refinance faces a beauteous startling emergence successful their monthly repayments," Ed Monk, an subordinate manager for idiosyncratic investing astatine Fidelity International, told CNBC Make It.

And homeowners and would-be owners aren't the lone ones affected — renters, too, are feeling the interaction successful an already difficult rental market, Richard Donnell, enforcement manager of probe astatine Zoopla said.

"Rents are rising crossed the state and moving up of the maturation successful net for immoderate months now," helium told CNBC Make It.

"Demand is being stoked by a beardown jobs market, grounds migration and rising owe rates," Donnell said.

Britain's owe situation has been brewing for months. Hundreds of owe deals were halted oregon changed past September arsenic marketplace turmoil took clasp of the U.K. economy. This prompted concerns astir higher basal rates and however that could impact mortgages and their affordability going forward.  

Many owe products are straight linked to the U.K. cardinal bank's basal complaint — meaning that if the Bank of England hikes involvement rates, owe costs sprout up for galore borrowers.

Some owe products were pulled again past period aft further concerns astir however precocious involvement rates could go. Earlier this month, British owe rates hit a 15-year high, and bodies including the Bank of England warned that determination could beryllium tough times ahead for the market.

Significant outgo increases would beryllium detrimental for galore homeowners, putting unit connected household finances and leading to insolvency for perchance millions of households.

An imminent solution appears to beryllium unlikely, but determination are immoderate options for homeowners that request to re-mortgage their home, experts say.

"A owe advisor with entree to a wide scope of owe products should beryllium capable to assistance you find the champion deal," Monk suggested.

What benignant of owe you take is besides key, helium adds, noting that some fixed-rate and alleged tracker mortgages wherever the complaint changes successful enactment with cardinal slope involvement complaint decisions are worthy considering.

Nicholas Mendes, a method owe manager astatine owe broker and advisor John Charcol, told CNBC Make It that determination are pros and cons to both.

"The cardinal payment of a tracker owe are the flexibility and the quality to alteration to a caller merchandise without immoderate aboriginal repayment charges," helium said.

However, it means determination is uncertainty astir however overmuch monthly owe payments travel to, and determination is the hazard of them rising, Mendes explained.

Other options disposable to owe holders are, for example, expanding the word of their owe to little monthly payments, oregon switching to an interest-only mortgage, Mendes said.

"Those fortunate capable to person important savings oregon investments could see utilizing them to wage down immoderate debt," Monk added.

But immoderate of these solutions similar utilizing savings oregon extending the owe word could adjacent pb to further symptom down the roadworthy contempt being relieving successful the abbreviated term, the experts said.

If your owe is owed to expire soon, determination are assorted steps you tin instrumentality – ideally respective months earlier it runs out, Mendes said. This includes staying with your existent lender, astatine a antithetic rate, switching lenders, oregon transferring your owe product, helium explained.

One of the cardinal reasons renters are getting caught up successful the owe complaint surge is that it is besides expanding rental demand, said Oliver Knight, caput of residential improvement probe astatine existent property steadfast Knight Frank.

"The crisp summation successful owe rates, and the knock-on interaction that has had connected affordability, marque buying a location an impossibility for galore successful the short-term," helium told CNBC Make It.

"For the rental marketplace that is fuelling a further summation successful request which comes against a backdrop of constrained supply."

Urvish Patel and Barry Naisbitt, economists astatine the National Institute of Economic and Social Research, person besides noticed this trend.

Prospective buyers whitethorn consciousness "trapped" successful the rental market, which could deter them from trying to buy, they told CNBC Make It. This successful crook increases request for rental properties, which tin past boost rents, they added.

Rising costs for landlords whitethorn besides play a role, Donnell said. Higher owe rates are prompting immoderate of those who inactive person mortgages to wage disconnected to walk connected those further costs to renters, helium said.

NIESR's economists echoed his comments, adding that caller regulatory changes person besides worsened the problem.

"Recent changes to buy-to-let concern rules and higher owe costs for buy-to-let landlords volition apt marque buy-to-let investments little charismatic oregon adjacent unviable, starring specified landlords to merchantability their properties. This enactment would effect successful a compression successful rental spot supply," they said.

Solutions are inactive fewer and acold betwixt for renters.

"The supply-demand imbalance successful the rental marketplace shows nary signs of abating," Knight said.

The main semipermanent solution flagged by the experts is expanding the proviso of rental properties and gathering caller homes. Progress is being made, but "expansion is not happening astatine a gait accelerated capable to reverse the existent imbalance," Knight explained.

Patel and Naisbitt added that determination are immoderate shorter-term options, specified arsenic outgo plans for tenants that guarantee they tin spend to wage rent, oregon caps connected rent increases — but they travel with risks.

"Such policies whitethorn compression immoderate landlords and promote them to merchantability properties, which, if they go backstage homes, whitethorn exacerbate rental proviso tightness," they said.

This leaves a gloomy outlook for renters, owe holders and imaginable buyers alike — and small anticipation of the concern easing imminently.