As mortgage rates began to stabilise at the end of 2022 following unprecedented volatility after last years mini budget, the market for people looking to secure property finance remains slightly more complex than it has done by recent historical standards.
Back in December 2022, the Bank of England raised the base rate to 3.5%. This has since increased to 4.25% as of March 2023. This brought borrowing costs to their highest interest rates since 2008. Whilst that is positive for personal savings, it caused new mortgage interest rates to shoot up to more than double what they had been six months prior on average.
In this changing environment, whether you are preparing to remortgage or purchase your first home, mortgage interest rates will most likely be higher than they were this time last year. But there is no need to panic. By understanding what’s required, planning ahead and receiving advice from expert mortgage brokers, there are plenty of options available making it easier to find a deal that works for you.
When should you start exploring mortgage deals?
“To be better prepared, we would suggest you look into your options early” says Romit Patel, Associate Director. “Seeking advice from a whole of market mortgage broker such as LDN Finance will provide you with access to more products, and ensure all suitable options are reviewed. This is because we have access to off market deals and specialist lenders that you won’t be able to get your hands on by going direct.”
Mortgage rates can be locked in up to six months before, especially when remortgaging. Many clients now do this to ‘reserve’ an interest rate which will prevent it increasing however, if rates decrease, the option is also there to swap to a reduced rate.
Get a mortgage when looking at property
Looking to move house or purchase your first place? Ensuring you have explored mortgage affordability ahead of house hunting is important to be taken seriously.
If you are planning a house move in the near future, having a mortgage agreed in principle is a good idea if you are to be taken seriously as a buyer. In fact, some agents will require this just to take you on viewings. Mortgage lenders will offer you a decision in principle which shows estate agents and vendors your affordability. With this in hand, and your offer accepted, you can proceed with the full mortgage application.
Current mortgage rates
With interest rates at a record low in recent years, many mortgage applicants opted for fixed rate product terms. This guarantees that monthly payments will remain consistent for the duration of the product term. However, mortgages that follow the market including tracker and variable products, as well as other product options such as offset and interest only mortgages, are now rapidly increasing in popularity.
What are my mortgage options?
Over recent months, LDN Finance has seen a number of clients are opting for variable rate mortgages, some without early repayment charges also. For many, they are choosing to follow rates over the next few years with plans to move onto a fixed-rate mortgage once rates reduce and the market stabilises.
However, it’s important to really consider whether this is a suitable solution for your personal circumstances. If interest rates were to rise again, so will your monthly repayments. We would urge you to really consider your affordability and attitude towards risk if you choose the path of a variable rate. This is one reason why clients still opt for fixed rates even though the repayments might be more expensive. For many, it guarantees a payment that clients commit to for a fixed time, which can be invaluable in a time where many of us are having to budget with the increased cost of living.
Mortgage rates: looking ahead
“With five-year and two-year fixes remaining steady and SWAP rates having begun to stabilise once more on the back of the recent budget and external economic events, we now expect to see mortgage rates continuing to slowly drift down” says Greg Cunnington, chief operating officer. “Recent decreases to SWAP rates, albeit with a bit of an increase again in the last week as the market anticipated the March base rate increase, appear to be having a positive affect on mortgage rates. SWAP rates are typically a good indication of lenders and the markets views on what the BoE base rate will be set at and its forecast direction of travel. They’re what lenders use to lend money to each other and set the mark lending to consumers. As they decrease, so often do borrowing interest rates. Currently, the pricing of fixed-rate mortgages have begun to decrease, especially after they soared following the mini-budget. This offers a positive outlook ahead. Lenders are also showing they have a large appetite to lend this year, which has seen positive criteria enhancements as well as rate competition, leading to more options for clients.”
If you are planning to purchase property or remortgage, we suggest speaking to an expert mortgage adviser who will be able to shed light on the current market and what options are available to you. To speak to our London based mortgage advisers, call 020 3903 9875 or complete our contact form where our experts will be in touch shortly.
Information is correct as of March 2023.