No doubt, over the course of this week you would have seen the headlines concerning the mortgage market.
Headlines have reported lenders ‘withdrawing’ from the mortgage market & ‘withdrawing’ mortgage offers, which has created anxiety and worry amongst borrowers and hasn’t been helpful at all.
Firstly, lenders haven’t been ‘withdrawing’ but ‘re-pricing’ their rates unfortunately upwards. In 2008 lenders withdrew from the market, this is not what is happening now, lenders aren’t exiting the market, simply changing rates.
Secondly, lenders have NOT been withdrawing mortgage offers. If your application is currently going through, you have secured your interest rate.
Importantly, if your application is going through, please return paperwork promptly to speed up your transaction and avoid any mortgage offer expiring.
Our goal is simple, to help our clients understand their options and plan ahead.
Keep Calm & Seek Advice has been our message all week, and thankfully we have been able to answer many of your questions and concerns over the past few days.
Why have lenders increased interest rates?
Off the back of Kwasi Kwartang’s mini-budget announcement last week, the financial markets responded with a lack of confidence in Liz Truss’ plan.
This sent the value of the Pound down against both the Dollar and Euro. A weak Pound makes goods more expensive for both businesses and us as consumers creating increased pressure on inflation which is already sitting at near 10%.
The Bank of England’s job is to keep inflation at 2% so they need to respond when inflation increases. Their biggest tool is the power to increase the Bank of England’s Interest rates or base rate, which in turn, for some mortgage products, increases the mortgage rate we pay.
In addition, SWAP rates, which most banks use to determine their mortgage rates, are at a fourteen-year high.
What does this mean for borrowers?
Well depending on your personal situation, this may not affect you at all.
Existing Borrowers
Should you be in a fixed-rate mortgage now, any market interest rate changes won’t be affecting you. It is important to speak with us to find out when your fixed rate is ending.
Remember if you have taken further borrowing on your mortgage, you may have ‘two parts’ to your mortgage each with a fixed rate ending at different times, so please seek advice.
We can secure you a new mortgage up to six months prior to the end of your fixed rate, but right now, we are simply encouraging clients to contact us at any point in your mortgage term to ask questions. Planning ahead for when your rate will be expiring is essential so please reach out.
Thinking of moving?
The majority of mortgages we recommend are ‘Portable’.
A Porting option allows us to take your existing mortgage over to a new property when you move.
If your mortgage is portable, it will say so in your mortgage offer.
For example, if you have a mortgage of £250,000 on a fixed rate of 1.5% until 2025, we can port this mortgage over to your new property so you don’t need to make any early repayment charges or importantly, lose this rate.
If your move required a new mortgage of £300,000, then £250,000 will be ported over on your existing rate as above with the remaining £50,000 being offered at current interest rates.
If you are looking to move, speak to one of our advisors who will advise on your options.
First-time buyers
The mortgage market is still stable and despite media reports, hasn’t disappeared.
Lenders are ‘re-pricing’ their products which is a common business practice, albeit the speed at which this happened has caused a media frenzy.
There is no way of getting away from the fact that interest rates have increased as a result. We are in a new interest rate environment. We are encouraging all first-time buyers to speak with us to find out what the changes mean for you and let us calculate what you can afford. Please don’t rely on the media, get the facts from the experts.
The rental market has seen an increase of 20% plus over the last year so exploring your options of buying and understanding the new cost of borrowing is highly recommended.
Time to remortgage?
If you are approaching the end of a fixed rate or need to borrow further funds, these interest rate movements will have the most impact on you.
Please note: if you are paying your mortgage on a capital and interest basis, a doubling in interest rates DOESN’T equate to a doubling in your monthly payment, a concern many clients had this week.
Our advisors are supporting clients with all available options such as temporarily increasing your mortgage term, something that can be shortened at a later date.
Offset mortgages are also becoming more popular for clients with unearmarked savings.
