What the @!%£ Is Up With Rates At the Moment
You’ve heard the stories, and you’ve seen the news. Mortgage rates are increasing, making borrowing more difficult and driving monthly prices up. This is on top of rising energy bills, petrol, and the general cost of living—scary times.
We have been very blessed with rates in recent years as they’ve been deficient, leading to many new borrowers and a thriving housing market. Recent headlines seem to indicate that this is all about to end. However, this may not be the doomsday that the news is making it out to be.
Recent headlines included “Mortgage Chaos: rates RISE after lenders pull hundreds of deals” but neglected to add that those same lenders re-introduced products within a few days.
Scary. News. Sells.
These times, it is more important to speak with a broker and get an idea of what’s happening and your options. Yes, rates are higher now, so should you stop looking for a property to buy and wait for this to blow over? Maybe not…
With rising costs, landlords are not uncommon to increase your rent so they can continue servicing their mortgages. If this happens, any extra income you may have been using to save will be lost by paying someone else’s mortgage. If you become a homeowner, you can start chipping away at your mortgage balance.
We live in uncertain times, and who knows if this is the new normal for rates? If you look at what happened recently with petrol prices, they rose quickly, settled and reached a slightly higher level than before. Many experts believe this will happen with rates, and the days of 1.2% 5-year fixed rates are in the past.
When calculating affordability, lenders will stress test against a higher rate to ensure payments are affordable if rates increase. This is why a few years back, clients would say, “Why is this lender saying I can only afford a mortgage with payments at £500 a month when my rent was twice that!”. They knew rates were low, so they were future-proofing your chances of paying the loan.
What this means is that if you apply for a mortgage at the moment and rates rise, then the mortgage should still be affordable. If rates fall, your next remortgage will be a blessing as you’ll be used to higher monthly payments!
If you were planning on buying a house before rates went up, then at least speak to me today to explore your options. A friend of mine has halted his property search due to rate rises and will continue “when they come back down”, but who knows when (or more importantly if) this will happen.
If you hold off on your property search, you will be competing against all the other buyers, so why not go for it now and get the property you want?
