Mortgage searches are hard enough under normal circumstances, and the current climate isn't making it an easier. With six Bank of England base rate increases,
rising cost of living, energy bills continuing to climb and upward moving mortgage rates, the mortgage market is tough to say the least. However, with some assistance, nailing a great deal needn't be as difficult as it sounds.
There are two more Bank of England MPC meetings before the end of the year with further increases predicted.
This puts additional pressure on personal finances, and for clients who are nearing the end of their fixed-rate terms, it's hard to know what's the right thing to do when it comes to choosing a new product.
Should I fix now or wait for the market to change?
This is the most common questions we are seeing from clients right now.
So if you need help finding the right solution for your situation, we recommend asking for advice from a professional.
There is one important thing to think about. How would you cope with an increase in your monthly mortgage payments?
This could be solved by adapting your lifestyle, but if this isn't enough to smooth out the increases an advisor can make suggestions on ways to help. For example, you could consider extending the term of the mortgage, or taking a portion of the debt on an interest-only basis (alongside a plan to repay this by the end of the term), you could also consider look at debt consolidation.
Consider all the mortgage options
Recently we have seen variable rates pricing quite distinctly lower than fixed products. Typically, we see these offered as either discount variable products, which set the interest rate you pay at an amount below the lender’s SVR (Standard Variable Rate) for a defined period, or as tracker products which will often track the Bank of England base rate, with a margin added by the lender and these fixed rates can be at least 3 percent more competitive than the next best available, fixed rate.
Many online searches for mortgage products are for those customers looking for fixed rates, and not looking further for all their options, meaning many people are missing potential savings.
Of course, some variable products will not be appropriate for everyone, particularly those with a fear of the risk of higher interest rates.
When a customer decides whether to buy a fixed rate or a variable product with flexibility, the customer’s future plans are a key element of the advice process and their decision making. And the portability of fixed-rate products is often misunderstood and misstated.
It’s important to remember that although most fixed products are usually portable, it doesn’t guarantee that you will be approved for a mortgage. This means you could incur an early repayment penalty you were not expecting.
As lenders change their affordability models, to account for the increased cost of living and rising interest rate costs, that means the maximum amount you’ll be able to qualify for today may decrease over time. So, if you want to port and upgrade (during a fixed rate term), you might have to approach a different lender
Don't miss out on a good deal
People don't want to miss out on a good deal and most lenders are currently offering a 6-month mortgage offer validity period, so if rates drop between now and the time you get to complete the remortgage, then you may be able to swap for another one later down the line.
But at least you have something secured to fall back on should rates not improve.
Your advisor will help you find the right loan and the lender that best suits your needs, ones that could be able to give you more flexibility, such as those that can consider extending their offer with the same product or waiving their early repayment charge in the last month.
Now is the time for customers whose mortgage products end in the first half of 2023 to look for advice from a mortgage adviser.
They can give you an overview of your current situation, your needs, and how they can help you.
With average SVR at 5.4%, it's more important than ever to speak to a qualified, quality adviser who will help you identify and understand your options.