Many experts predict that the base rate will be raised in May and this could be followed by further rises in the months to come. If hikes do materialise, will your monthly mortgage payments rise? Will you be able to afford it?
According to the parent company of both the Clydesdale and Yorkshire banks, 47% of us in Britain are unaware that Bank Rate may be about to go up and, more worryingly, 57% of us do not know how a rise might affect our finances.
If interest rates are increased, market commentators suggest that the rise will be a small one, perhaps just 0.25% which would take the base rate to 0.75%. If you are not on a fixed rate mortgage, do you know how much a rise of this amount could add to your monthly payments? Probably not a lot, but if the Bank of England’s Monetary Policy Committee continues to vote for more, incremental rises this year, the knock-on effect could leave you seriously out of pocket. With householders’ incomes already stretched, now is a good time to review your finances, starting with your mortgage.
If you want help working out how much more each month you would need to find, on our website, we have an easy to use mortgage repayment calculator.
A good time to remortgage?
Currently, mortgage pricing is about as good as it has ever been, with lenders competing with each other to offer the best deals, so if you want to protect yourself against increased monthly payments, now is a good time to consider remortgaging onto a fixed rate. But don’t consider for too long… ACT too! Mortgage rates are already creeping up, albeit marginally, particularly the longer period fixed rate products. As soon as the market turns, lenders will stop competing with each other and start competing with you, the borrower.
Fast product transfer
Many lenders are offering product transfers, which is a simple and very fast way of remortgaging with very little paperwork. This can be the most cost-effect route, particularly if you are not looking to raise any capital. But how do you know if this will be the best deal for you? That’s where we come in. We offer free mortgage reviews. With access to the whole market, and a variety of tools at our fingertips, we can very quickly work out which refinancing option is best for you. It will save you lots of time, doesn’t cost anything and you’re under no obligation. If a product transfer directly with your lender is the best route, we’ll tell you.
If you are looking to move house, the news is mixed. If you blend the various house price trackers together, a fairly flat picture emerged for the first few months of this year. Nationwide reported prices were down -0.3% but Halifax reported the reverse, up +0.4%. Up or down, in recent months the actual rate of house price growth has slowed. This is good news if you’re are planning to buy. According to Russell Galley, managing director of Halifax Community Bank, January witnessed the lowest rate of house price growth for nearly five years. It’s way too hard to predict how long this slowdown will last but according to Rightmove, the number of newly marketed properties has dropped, equivalent to a 5% dip in supply compared to March 2017. As we all know, there is a direct correlation between supply and demand, and fewer properties listed for sale has led to a rise in asking prices – again according to Rightmove and they really should know.
Commenting on the findings, director and housing market analyst at Rightmove, Miles Shipside, said that sellers should be mindful of buyer affordability saying:
“The more they increase prices, the more buyers will hit their ceiling on the amount they are able to save for a deposit or borrow for a mortgage.” Of course, asking prices are not sold prices; they are just a starting point and coupled with flat market canny buyers should have the impetus to negotiate hard.
How much can you borrow?
I’m sad to say that Paragon is no longer offering its amazing six times income mortgages. We knew this semi-exclusive deal, to which we had access, would not be around for long. However, it is possible to borrow up to five times income, although your credit rating will have to be squeaky clean. And remember, the larger your deposit, the better the deal. But as I’ve already said, pretty much all rates are currently very competitively priced. Remember that mortgage offers are valid for anywhere between three and six months, so it’s definitely worth applying sooner rather than later, even if you haven’t found the right property. If your current home has enough equity, you might also want to consider Let to Buy, i.e. turning your home into a buy to let when you move. As you can imagine, lots of our clients are landlords and many of them have gone down this route – it’s how some of them started in property investment…