01 Nov 2022
Mortgage Market Insights – November 22
Warning: What you read below, could be out of date by the end of the week!
Wow, we’ve certainly had to learn to expect the unexpected over the past couple of years and October hasn’t been any different. Third Prime Minster of the year, markets up and down, mortgage rates down and then up.
Widely reported increases in mortgage rates after the mini-budget in late September are true. Although, since the highs in mid-October, we’ve started to see interest rates reducing slightly for homeowner mortgages, and we expect, buy-to-let mortgages to follow.
First-time buyers
Interest rates aside, First-time buyers still want to buy. Why wouldn’t you?
Arriving at the decision to purchase no doubt comes well before learning of the cost of a mortgage.
Don’t let any increase in interest rates put you off. Now you have made your decision, the next stage is to ‘Run the Numbers’
Home of Mortgages works with several estate agents from around the country which means we get a good take on market conditions. Despite there being a reduction in overall homebuyers (made up of first-time buyers, upsizers, downsizers, and buy-to-let landlords), first-time buyers are still buying. I believe this is because the motivation to buy is driven by a greater need, i.e moving out of the family home, relocating for work or to stop an ever-increasing rental payment).
We’re working with first-time buyers helping them to truly establish a budget and arrive at an affordable loan amount providing the confidence to go out and make an offer.
You can still purchase with a 5% deposit, more properties are coming to market, and seeing as there doesn’t seem to be any likelihood of us going back to really low-interest rates, now could be the best time to get a good deal and buy without much competition.
Is a tracker mortgage right for me?
Best buy fixed-rate mortgages are being offered from 5.09%. After a decade of very cheap mortgages, it is understandably difficult for borrowers to comprehend this new cost of borrowing being the new norm.
When presented with the new cost of borrowing, clients looking to remortgage are asking brokers questions such as “What other options are available?”
A tracker mortgage is an alternative to a fixed-rate mortgage. The rate you pay tracks is a set percentage above the Bank of England’s base rate.
Tracker mortgages are available at rates starting at 2.95% which may sound great compared to being offered a fixed rate at 5.5%, however, it is important to remember a tracker product is a variable rate mortgage.
For example, a 2.95% is actually 0.70% above bank of England base rate. As the Bank of England base rate today is 2.25%, this results in a payrate of 2.95%.
On Wednesday 3rd November we are expecting a further base rate increase from 2.25% to perhaps 3% or even 3.25%. In the event the base rate is increased by 1%, your 2.95% tracker rate will increase to 3.95%, even before completion.
A tracker mortgage will be recommended for those borrowers who can afford increases in monthly payments and who have the ability to afford their mortgage should rates keep rising.
Here to Help
Those of you following us on social media may have noticed our recent Here to Help posts. Our admin team and advisors are genuinely Here to Help.
For clients looking to remortgage, interest rate shock is a real thing. Once again, ten years of reducing mortgage rates have resulted in us all managing our household budgets around a low-interest-rate environment. Rates are now increasing, and it is widely expected we will be living in a world where a rate of 5% is the new normal (a pretty standard rate of interest over the last 30 years).
For clients remortgaging their home and coming off a fixed rate of 1.5% and moving to a fixed rate of 5.5%, there is an element of budget planning that is required and discussing this with your advisor is the best way to plan ahead.
You may receive a call, text message, or email from one of our team as we endeavour to reach out to as many of you as possible to help you plan ahead.
