Amongst the current turmoil, we’ve seen a sizeable increase in mortgage interest rates.
In light of this, an analysis by the Resolution Foundation has suggested that for over five million households, annual mortgage payments may rise by an average of £5,100 between now and the end of 2024. Although, £1,200 of this amount was attributed to the impact of the mini-budget – much of which has now been shelved.
(Source: Resolution Foundation, 15 October 2022)
A further consequence of the financial crisis following September’s mini-budget is that we now have a new Prime Minister (and a different Chancellor), which has helped to calm the financial markets. At least for now. But high inflation still remains (at around 10%), and this will continue to have an impact on interest rates.
(Source: Office for National Statistics, CPI, October 2022)
So, is it now time to reassess your own mortgage borrowing needs? Of course, those on fixed rate deals would remain, if wanted, at their agreed interest rate until the end of their deal period.
Stamp Duty decrease
Various property purchasers will now benefit from paying less tax than they expected.
Base Rate rise
Upward inflation has been a contributory factor in the Bank of England Base Rate rises, which currently stands at 3%. Whilst it is not the only determinant that influences mortgage interest rates, it can have a knock-on effect. And recent comments from the Governor of the Bank of England hint at further rate rises.
(Source: Bank of England, 3 November 2022, and Governor speech 15 October 2022)
Mortgage Rate rises
The rising trend in interest rates will be a shock for many. Although, with a degree of calm returning to the markets, some lenders have reduced their rates. Albeit they’re still a lot higher than a year ago, and even against what was on offer back in the summer.
Plus, for those lenders that haven’t already factored this in, the subsequent Base Rate rise may have an impact on some of the deals on offer.
(Source: Moneyfacts, average rates comparison to November 2022)
Securing a suitable deal
Future Base Rate decisions will have an impact on the marketplace, as will the Autumn Statement, when the Chancellor sets out the tax and spending plans on 17 November.
Understandably though, it is at times like these that our skillset can really be utilised to your advantage.
For example, some homeowners may view the combination of rising costs, and higher interest rates with great concern. In which case, when looking for a new mortgage deal, they may add selling up and downsizing into the mix.
Of course, the circumstances for each borrower will be different, and that’s why it’s vital that you take advice.
House prices
In the midst of all this, UK house prices continue to rise, by 7.2%, on average, in the year to October 2022. But the general view is that price rises will ease further over time, with possible falls.
However, on a positive note, price rises over the last few years may offset any fall,
as many existing homeowners have built up their property asset value. For example, in the last two years alone, the average house price has increased by almost £50,000.
This 22% rise in value could also give borrowers access to a ‘comparatively’ better current deal – as the loan-to-value required today could be lower than what was needed, say, 2, or 5 years ago. Also, house prices over the long-term have been incredibly resilient, and in the last 30 years, for example, we have seen the average house price rise from around £52,000 to about £273,000. That’s more than a fivefold increase.
(Source: Nationwide, House Price Index, October & Q3 2022)
Lender requirements
As has been the case for a good few years, borrowers will be well aware that lenders continue to apply stringent controls on both the ‘evidencing of income’ and if the borrower meets the ‘affordability’ criteria.
Remortgaging early?
In a broadly rising market for interest rates, some borrowers may feel that it is beneficial to pay the early repayment charge to ensure they can get what they believe is a better rate now, rather than waiting until their deal period ends.
No one knows where rates will be in the future, but talk to us first, as we can run through the options. We could then assess if it might save money, or cost you more.
This is just one reason why you should talk to us…
With so much to consider, it can be quite confusing. For our part, we have the expertise, and are working in this market-place day-in day-out (and currently many evenings!).
We also know how swiftly the market moves, with deals being pulled by lenders – with minimal notice – plus, we’re tenacious, and will work hard on your behalf.
Who should be talking to us?
– Those looking to purchase their first home.
– Those who have a mortgage deal that’s due to end in the next 6 months or so.
– Those borrowers who simply want to obtain a new deal at the current interest rates and/or raise more funds.
– Those who need more living space, either within their current home, or are looking to move.
– Those who may be worried that further cost of living rises (and possible property price falls) could markedly impact on their mortgage affordability calculations into the future.
