Bringing Down Inflation in 2023?
A week certainly is a long time in politics, but we have a new Prime Minister, and he will get on with the tasks in hand including trying to bring down inflation. The money markets have already reacted favourably, so this should be good news for borrowing and the property market in general – stability will bring surety and greater confidence. There is still a desire to move as people search for more space, better schools or relocation and we’re going to see around 1.3m homes change hands this year.
Thousands of mortgage deals on offer
Since the beginning of October we’ve seen over 3,000 new mortgage deals launched and there are currently over 10,500 available in the market. This is a big number to keep track of so now you can subscribe to our weekly “best mortgage buys” straight into your inbox which is very handy if you’re checking the rates ahead of buying a property. The cheapest fixed rate is around 5.09% now but this can change so our advisers keep up to date will the latest availability.
Can you afford it?
Affordability is still a big hurdle for many of our clients so we’re always happy to discuss the various ways that will make borrowing more accessible. Take a look at our Affordability Calculator which is quick way to find out how much you can afford to borrow. Just enter your income and who is buying and see the instant results. You can then click a button to take the next step to get an actual mortgage quote.
Depending on the lender criteria and the applicants age we may suggest taking out a loan for longer – up to 40 years in some cases. If you want security knowing how much your payments will be every month, then a fixed rate is the best option for the client. If your priority is the lowest payment, then taking out a tracker/variable rate is an option. However, the payments will increase, or decrease, in line with the Bank of England base rate.
To track or not to track?
At the moment, the lowest tracker rate is 2.95%, if compared with the lowest fixed rate at the same loan to value, the difference is 2.19%, so you will save money each month and, if rates don’t increase by more than 2.19% you will continue to save money. There is also the option of doing part and part which means you could put part of the mortgage onto a fixed rate and the remaining balance of a tracker/variable rate.
Future proofing your payments
Lenders will still make sure you meet their lending criteria so you shouldn’t be given a loan you can’t pay back if your circumstances haven’t changed. Earlier this year, lenders were advised that the stress test of 3%, which has been in place since 2014, was no longer required. However, the Financial Conduct Authority (FCA) still require Lenders to use a stress rate of 1%.
We’ve been helping clients who are looking to switch their mortgage early to lock into today’s interest rates. It’s always worth reviewing but it is unlikely that by switching now you will re-coup the costs incurred by repaying the mortgage. However, you may ease any further increase if rates continue to increase. If you have a fixed rate mortgage finishing next year you may be able to “reserve” a deal now and then see if rates have decreased buy then or, if not, keep with your reservation. It’s another way of future proofing affordability. We always advise our clients based on their individual circumstances and attitude to risk.