I was made redundant and can't afford our £2,981 monthly mortgage, what can I do? DAVID HOLLINGWORTH replies

I've just been made redundant from my job. I have been paid three months' salary, but having spoken to recruiters it seems it might be tough to find a job at my seniority level in that time. 

My wife and I have two young children and a big mortgage with a high interest rate of 4.78 per cent. My wife works part-time so most of the mortgage has been paid from my salary until now. 

We do have some rainy day savings, but don't want to burn through these too quickly if it might take me a while to get a new job. Most of our wealth is tied up in our pensions. 

Our mortgage is currently costing us £2,981 a month. We're just over a year into a five-year fix with a 20-year term remaining. 

The prospect of facing this mortgage without having an income is terrifying. Do I have any option to pause the payments or cut them down? 

Mortgage help: Our column sees broker David Hollingworth answering your questions 

David Hollingworth replies: I’m sorry to hear your bad news. There’s no good time to be made redundant but to hear that the recruitment opportunities may be more limited and that competition for available roles could therefore be tough will naturally only add to your concerns.

I hope that those concerns may prove to be unfounded, but in the meantime it’s sensible for you to be considering the implications of a more prolonged period without income.

The mortgage will generally be the single biggest outgoing for most households. The mortgage broker I work for, L&C, conducted some research recently where over 40 per cent of respondents stated that the mortgage was the monthly bill that caused them the greatest financial pressure.

You may feel that your mortgage rate is high but with the Iran war affecting mortgage rates, it’s not likely that you will be able to find a deal that would significantly undercut the current rate. 

Any early repayment charge that would apply is also bound to be substantial when you are so early into a five-year fixed deal. Looking to find a lower rate to cut costs is therefore highly unlikely to be viable.

You could get six months' breathing space

The rising cost of living in recent years, which coincided with a spike in interest rates, saw the former Conservative Government put measures in place that could offer some assistance to worried borrowers. 

The Mortgage Charter is still in place and many lenders signed up to the terms, which were designed to offer worried borrowers the opportunity to cut monthly payments.

One commitment was to offer existing borrowers reaching the end of a deal a new product up to six months before the end of their current deal. That was a relatively simple one for lenders as it was already commonplace.

However, other measures marked a departure from standard practice. These allow a customer to switch to interest only for a period of up to six months or to extend the mortgage term.

The borrower must be up to date with their payments to qualify, but there’s no need for the lender to conduct a new affordability check. 

Lower costs: With an interest-only mortgage, you will only pay the interest each month, with the loan amount remaining the same

Such a material change would have previously required a lender to reassess the customer’s circumstances to make sure the mortgage would continue to be affordable, which would have required evidence of ongoing income - a problem for someone who has just lost their job.

An interest only mortgage does what it says on the tin, so the monthly payment would only meet the interest and not make any dent in the outstanding mortgage. Based on your figures I estimate that could reduce the payments by more than £1,100 per month to about £1,900. 

Extending the term on a repayment mortgage will also lower the monthly payment. This is when you add more years to the length of the mortgage, spreading the payments over a longer time. 

Lenders can offer terms of up to 40 years and if that could be implemented in your case, it could see a reduction of more like £800 per month to about £2,100. 

However, these measures will increase the cost of your mortgage in the long run and it will be important to switch the mortgage back again once you get a job. 

Watch out for the long-term cost  

Both these approaches may give some relief in reducing payments, which may help you as you navigate your way back into your next role. However, they do also come with a cost implication.

Interest-only, even for the temporary period of six months, means the mortgage isn’t reducing. When it flips back to repayment the remaining higher balance will be repaid over a shorter timeframe, so monthly payments and the total interest charge will be higher.

Similarly, increasing the mortgage term will mean that it is paid off more slowly and the mortgage interest charge will be higher. 

There’s an option to switch back to the original term within six months, which may give you enough time, but if the longer term became permanent it could result in a mortgage interest bill that is tens or even hundreds of thousands more.

Another important commitment of the Charter is that anyone concerned about their payments can contact their lender without worrying that their credit file will be affected. The above measures might help but wouldn’t put payments on hold.

Talking to your lender and explaining the situation would help to deliver a more tailored option and could potentially even include a payment holiday to help you through what will hopefully be a short period of need.

It’s always better to talk to your lender as early as possible where you are worried about your mortgage payments. 

They should work with you to develop a more personalised plan of action which could give you the breathing space to get through a difficult moment, as well as explaining the implications of any of the options.

Good luck with the search for your next opportunity.

Best mortgage rates and how to find them

Mortgage rates have shot up again due to inflation triggered by the conflict with Iran reversing hopes that the Bank of England would cut rates. This means those remortgaging or buying a home face higher costs.

That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.

This is Money's partner L&C can help you with its fee-free mortgage service.

> Compare mortgage rates

> Find the right mortgage for you 

To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.

This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.

You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.

If you’re ready to find your next mortgage, why not use This is Money and L&C’s online Mortgage Finder? It will search 1,000s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C 

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.