Stephen Murphy of Lifetime Mortgages gives his opinion on the current mortgage market, and what today's buyers need to know before planning their next property purchase...
Q. What is the best rate that new mortgage clients can expect to achieve, in the current climate?
‘Half the experts don’t know what rates will do next. The other half don’t know that they don’t know what rates will do next’
This quote always has resonance, at Lifetime Mortgages and we are no different. Our views are personal opinions based upon the information to hand, and financial services commentary from a variety of respected sources. However, whilst predictions may ultimately be inaccurate there is now a pretty hefty consensus that rates could be set to drop steadily over the next 12 months and beyond. This newfound optimism has emerged since the meeting last week on 21st-September when the Bank of England Money Policy Committee held rates for the first time in 14 months
Despite that rates weren’t physically reduced last week but held at the current level, the signal has been taken this could be start of a trend. Certainly this has already had an effect on fixed rates with rates for 2- and 5-year fixed rates both now starting below 5% for the first time in many months.
Currently the most competitive rates available are 4.9% fixed for 2 years * and 4.8% fixed for 5 years*. This is still very early days and further cuts are anticipated as lenders adjust their financial expectations.
*Typical illustrative details are shown below:
Q. How are lenders currently stress-testing for new applicants? What should anyone applying expect to have to provide?
Lenders are applying their affordability calculations based on the current rates, this will be adjusted periodically. It is anticipated the lower rates could impact this. A 15-minute conversation plus a couple of payslips should allow us to assess a fairly accurate borrowing capacity for our clients, giving them confidence to pursue their financial plans.
Q. How is the mortgage picture expected to change / improve over the next 6 months?
As stated above, it is likely that rates could fall. There are no guarantees if predictions prove to be correct then fixing for 5 years or more could tie clients into a higher rate. As a rule of thumb, if a client’s finances aren’t extremely tight at application time then a 2-year fixed rate could possibly be less expensive for the term of the deal. If a client’s finances are tight a 5-year fixed rate may still be a good option as this guarantees stable repayments for a longer period which may well be more important to our client. This needs to be discussed in depth and is very important.
Q. How long would you recommend fixing a mortgage for, in the current climate?
As a straight answer, in most cases probably 2 years for short term stability and access to options at the end of term. There are also cases where we recommend a tracker mortgage with no early repayment charge to take advantage of falling rates and having the option to fix when rates are at a level that would make financial sense.
Q. What are the benefits of using a broker?
By using a broker, it is very likely you will obtain more choice as generally a broker can access deals not available by applying directly to the lender.
You have choices and to be clear are not obliged to use our services regardless of how much consultation work is involved. However, if the agent is able to confirm to the vendor that a buyer has been vetted and can proceed this will give a much better chance of the offer being accepted and the property removed from the market.
A good broker will manage the application from start to finish giving everybody in the chain confidence that any potential issues are addressed promptly and properly thus enhancing the chance of a successful completion.
Our fees are simple and transparent, we charge a flat fee of £299 for a standard mortgage payable ONLY upon successful completion.We have over 50 years combined experience and have a reputation for offering clear and honest advice in plain English. If something isn’t right for you, we will tell you.
For more details please call 01628 963550 or visit www.lifetimemortgages.co
Mortgage details*
• 2 Year Fixed 4.9% APRC 7.3% – Monmouth Building Society- based on a loan of £250999 (after £999 lenders arrangement fee is added) over a term of 25 years- monthly repayments £1452.73 - Total amount of credit. £289035- Total amount payable by the customer £540035.84
• 5 Year Fixed 4.8% APRC 6.6% - Monmouth Building Society -based on a loan of £249000 (after lenders cashback of £1000 is reduced) over a term of 25 years- monthly repayments - £1439.71 – Total amount of credit. £264930 Total amount payable by the customer £513930.80
The information contained within is correct at the time of publication but is subject to change.
Your home may be repossessed if you do not keep up repayments on your mortgage.