Mortgage advice for the Metro

ended 28. October 2021

A journalist at the Metro is seeking quick comment from brokers about the following:

  • What's changing about mortgages in the aftermath of the Budget and what do people need to know (broken down in an easy to understand way)?
  • Who will be affected (is it all mortgage holders or will some have it worse?)
  • Any tips/advice to make the situation better?

Deadline is tight so no waffle - 2.30pm.

6 responses from the Newspage community

Star Quote
"Mortgages are making the headlines due to the possibility of inflation reaching 4%, which was again reiterated in this week's Budget. If the Bank of England decides that it needs to increase interest rates in order to curb rising inflation, it could mean the end of cheaper mortgage borrowing resulting in higher outgoings for households that are already feeling the squeeze. "Taking advantage of a fixed rate now is arguably the best way to get ahead and make sure you are protected from any future interest rate rises. Some lenders will allow you to secure a new rate six months before your current deal expires so it's best to start looking now and not leave it too late."
Star Quote
"Rishi Sunak said in his speech the Bank of England needed to act to control inflation, and reading between the lines this may well mean he expects an interest rate rise to help get it back under control. Even with no real mention of mortgages in the budget, the cheapest fixed rates have increased in price over the last few days, and many sub-1% mortgages have gone. If you are looking for a mortgage, it is a good time to lock into a deal before they get even more expensive. If your mortgage rate is coming to an end or you are on a standard variable rate, it is advisable to choose a new deal sooner rather than later. Most of the rate hikes have been for borrowers with the biggest deposits so thankfully the first-time buyer deals are not more expensive. "
"Interest rates are likely to soon be on the rise, which means mortgage payments will be going up for anyone who is not on a fixed rate mortgage. If you have the option to apply for a mortgage sooner rather than later, you will likely save money by doing so, you can apply for a remortgage rate up to 6 months before your deal actually expires."
"Following the budget and in preparation for a base rate rise, mortgage lenders interest rates are starting to edge up, and that's likely to continue now for some time. They're doing this, so they don't lose their margin when it becomes more expensive for banks to borrow on wholesale markets. Anyone currently sitting on their lender standard variable rate should get advice ASAP and move onto a better deal following a chat with a good independent mortgage broker. If you're currently tied into a deal, don't worry about it unless that deal is due to expire within the next six months - most mortgage lenders remortgage offers last for six months, so you can lock into a good deal now and wait for the new one to take effect six months from now, even if rates go up in the meantime."
Whilst nothing in the budget directly impacts on mortgages, there are plenty of things going on that indirectly effect them; inflation and the rising cost of living, the potential for interest rate rises from the Bank of England and increased taxation are the main ones. As lenders decide on how much they will lend to you based on their analysis of your affordability any increase in the cost of living will, at some point, impact on that calculation. So the more expensive the basics of life get, the less you can borrow as a mortgage for any given income. The potential for increases in interest rates also have a similar drag on the potential borrowing amounts for customer; if the lenders feel that rates are going to rise then they will want to provision for those future higher mortgage payments in their calculations. Again, this could reduce the amount of mortgage they are willing to offer. The best way to try and combat this, before you apply for a mortgage, is to look through your bank statements and work out what is a luxury you are willing to sacrifice on the alter of home ownership; that gym membership you took out in January, but haven't used since March for example, do you REALLY need Amazon Prime, Netflix, Spotify and Apple Music? The more cash you can free up that could potentially go to meeting those mortgage payments, the better (and by that I mean safer) you look to a lenders underwritter.
"Although there hasn't been much movement with lenders since the budget was announced, it is inevitable that interest rates will increase in the future. If you are in the right situation, it is worth locking in a great deal while you can. This is even more important for those in London where the average mortgage loan is higher."