*Updated 22/12/22
Understandably, recent market turbulence has prompted an influx in homeowners reaching out to their lender or mortgage broker, over concerns about monthly payments and what will happen once their fixed-rate mortgage deal ends.
It seems that we all have plenty of mortgage questions that need answering right now. Here we address a few of the most pressing mortgage questions as best we can, to shed some light on what the future holds for your mortgage.
Should I be moving house in the current climate?
Sometimes house moves are essential, and sometimes they are simply desired. Unless you plan to remain in the next property you purchase for the foreseeable future, then you would need to carefully weigh up the affordability of moving in the short term.
What should I do if my fixed-rate mortgage is due to expire?
As everyone with an expiring mortgage rushes to grab themselves a new fixed rate deal, this results in the acceptance of the added expense, in a bid to avoid further interest rate hikes. What type of mortgage you choose in the current climate comes down to your attitude to risk. And what a good deal looks like to each of us, is a very tricky question to answer. Many of the mortgage rates you will see advertised, are only available to ‘prime’ borrowers; those with high credit scores, little debt and very stable finances. Not everyone falls into that category.
What can I do to get the most suitable mortgage rate?
There are several things you can do to help yourself when it comes to putting yourself in a prime position to get the right mortgage rate for your circumstances. Looking at ways to check and improve your credit rating is a great place to start if you are at the early stages of the mortgage process. Talking to an independent mortgage broker instead of one particular bank will also mean that you will be able to get mortgage rates from the entire mortgage market, as opposed to just one single lender. You should do this as soon as you have decided to explore making your house move.
If you have found a property to buy, and are preparing for your formal mortgage application to go ahead, then it absolutely pays to be mortgage document ready. Mortgage rates are in flux currently and it is the efficient and organized buyers who are tending to avoid overnight rate hikes, which have sadly become commonplace.
What type of mortgage should I be looking at?
At the time of writing the Bank of England base rate is 3.50% and the average UK fixed mortgage rate according to moneyfacts.co.uk is 6.47%.
A tracker mortgage tracks the base rate, and is currently significantly cheaper than the average fixed mortgage deal. If you opt to go for the discounted rate, you will pay the lower rate until the base rate rises. And we have been told that more base rate hikes are on the way. But fixed rates could possibly lower if the UK enters a recession. If you opt for a tracker mortgage, then you have to be prepared for the uncertainty that accompanies it. Tracker mortgages don’t typically come with the early exit fee penalties associated with fixed mortgage products, so you may be able to jump across to a fixed deal relatively easily, but it is worth checking with your broker if this is a route you decide to go down.
If I have savings, should I overpay on my mortgage?
Choosing to pay off a chunk of your mortgage to reduce the total borrowing, or ending a mortgage deal before the date previously agreed with your lender, can result in an early repayment charge. While some banks have reported a surge in people overpaying on their mortgage in the week following the mini-budget in a bid to reduce their overall balance and monthly repayments, this is something that does need to be well-considered. With rising interest rates, comes increased potential for savings growth, so make sure you do your sums to compare the difference in what you would pay for a higher rate mortgage.
But aren’t there fewer mortgage options available to me now?
There were typically c.4000 mortgage products available for UK homeowners,and we have lost access to about 1000 of these. However, there are still plenty of products still available, with independent mortgage brokers having access to the entire pool of these.
In times of turmoil, it helps to talk things through, which is why our online mortgage appointment booking system is open around the clock, for you to book a face-to-face mortgage appointment with our Skyline Independent Mortgage Broker, Tony.
