The mortgage market of late has undergone some significant changes, and this is raising many important questions among those considering borrowing in the months ahead.
Specifically, buyers are keen to discover how mortgage rates are likely to be affected by the impending bank rate decision (on 18th June) and the ongoing disruption in the energy markets. To offer some clarity on this, and the likely trajectory of borrowing costs this summer and beyond, Mortgage Broker Stephen Murphy of Lifetime Mortgages is here to answer all your questions:
Can you explain what’s happening with the current mortgage market please?
The market appears to be holding up astonishingly well considering the uncertainty caused by recent world events. Whilst rates have increased, this largely owed to some knee jerk reactions in the sector, and the trend has begun to reverse somewhat in recent weeks.
What are the main challenges of the current market, in your opinion?
Inflationary pressures caused by soaring oil prices will inevitably filter through into the economy in some guise. ‘What Trump does next’ is always the question, however a long-term conflict is not his overriding aim, and the US are as keen as everybody else to find a settlement. The big challenge is...how long is this going to take?
What do you expect to happen in terms of interest rates?
In the short term, we can expect some degree of instability, particularly as the relevant parties work out a compromise. In the longer term, it is surely a matter of when - not if - things settle down again.
Is now a good time to remortgage?
On the assumption things could get worse before they get better, a two year fixed rate is probably the ‘best advice’ for most mortgage holders looking for a new deal.
What are the options for those on a variable rate?
The SVR (Standard variable Rate) is not a favourable option currently as it is very expensive. Most lenders will offer a tracker rate, which is priced in line with the Bank of England Base Rate. This is invariably much lower than the lenders SVR, and in many cases the client can switch to a fixed rate at any time without any charges.
In the current cost of living crisis, what are the benefits (if any) of payment holidays?
Payment holidays can be applied for with no damage to the clients’ credit rating. An application will be looked at sympathetically by all lenders, but it really should only be considered if finances are severely stretched. However, a payment holiday is always preferable to mortgage arrears.
What is the key piece of advice you would give to borrowers?
As always, everybody has a different situation and there is no one-size-fits-all solution, underscoring the need for personalisation. The market is somewhat volatile, but then this is not necessarily abnornal, and economic headwinds - to some extent - are unavoidable. These factors impact rates, which filters down into mortgage costs, with knock on effects for affordability. If in doubt, therefore, a borrower should always set a maximum budget, take a fixed rate (to avoid mortgage increases) and borrow within that budget.
For more details on the local property market, Lifestime Mortgages services, or to discuss your mortgage requirements please call Braxton on 01628 674234 or email property@braxtons.co.uk.