Rob Starr, CEO of Seico, weighs in on the current mortgage market.
The mortgage market has had the biggest interest rate rise in over 20 years, which means higher monthly payments for anyone not on an existing fixed rate or for anyone wanting a new mortgage now. Not great news, but not exactly unexpected either.
However, what I think what was unexpected was the help that followed straight on from that message. Firstly, there is a stamp duty adjustment, which increases the allowance from £125,000 to £250,000 and even better for first time buyers as they see an increase from £300,000 to £425,000. This could not have come at a better time for people wanting to buy their first home or move home.
Secondly, lenders have been told by the Bank of England that they no longer have to check if their mortgage borrowers can afford higher rates by the Bank of England. Back in 2009, after the credit crisis when interest rates tumbled from nearly 6% to just 1%, it was felt that borrowers needed to prove that they could service loans if the rates increased again. Lenders now no longer have to do this as it is perhaps felt that we are already at the higher level. Whilst the interest rate test was not the only affordability test lenders use, having it removed will certainly mean affordability on your current income and will allow lenders to judge you more fairly as to where you are today.
And finally there are still fixed rates available. In fact, there is still a huge choice on fixed rates, from 2 years, to 5 years and even 10 years. A fixed rate gives you the comfort to know that even in a tough and changing financial climate that your mortgage payments will not increase. Anyone on a variable rate or about to see their current fixed rate expire should consider taking advantage of a new fixed rate now and make sure that they can weather the storm until it eventually runs out, which if history tells us anything, it will. Currently we are seeing lenders starting to remove a number of their fixed rates as they wait to see what the Bank of England will do over the next few months, so it is important that you speak with a Whole of Market broker as soon as possible. Not only can we offer you choice from across all lenders and make sure that you do not miss out on the best deal that is available on any given day to suit your own position, but also, we can hold a rate for you today for a number of months so you are prepared and ready without fear of yet another increase.