There is a lot happening in the mortgage market at the moment, and it’s near impossible to avoid reading about increased mortgage rates, and lenders adjusting their products on a near daily basis.
I appreciate this will be a concerning time for most people that have a mortgage, especially if your mortgage is due for renewal in the next 6-12 months.
It is inevitable that everyone will face an increase compared with their previous interest rate. As it stands, this is impossible to avoid.
Interest rates have been extraordinarily low for some time now, and naturally, everyone has gotten used to it. The rates we have had for the last 10+ years were unfortunately not the norm, and we are now in the position that we need to tighten our belts and adjust our expectations as fluctuating rates could be the new norm.
For many this will mean having to review their finances, looking more closely at essential expenditure, and many will have to potentially re-think spending based on disposable income.
Given the uncertainty around interest rates at the moment, it is always important to seek independent professional advice when looking for your new mortgage. An independent mortgage broker can search the whole of the market on your behalf, and can often source exclusive mortgage deals, not available directly to the public, to secure you the best available mortgage deal for your circumstances. An independent mortgage advisor can also give advice to help to structure your mortgage to suit your budget and needs.
If you are remortgaging and your current deal is due to end within the next 6 months, you may be able to lock in a new mortgage deal with a number of lenders. Essentially, what this means is if interest rates keep rising, you have protected yourself as much as possible by already locking your deal in.
If interest rates happen to come down after this, you may have the option to switch on to the lower mortgage deal (as long as your new mortgage has not yet started).
A good mortgage broker should monitor mortgage rates on your behalf to help ensure you’re always able to get the best deal available to you.
If you are on your lender’s standard variable rate (SVR), you should seek advice now as it is likely that these will increase again in the near future due to the predicted Bank of England Base rate rises.
There is also the possibility that you are paying far more than you need to in comparison to other available options.
If you are looking to purchase a new home, an independent mortgage broker can help you to work out how much you may be able to borrow, and also what your monthly payments could look like.
They should also help by factoring in other costs such as insurances, factors fees and utilities.
I get asked on a daily basis ‘how long do we fix for, 2,3 or 5 years?’ and ‘when are interest rates going to come down?’
In relation to how long someone fixes for, there is no exact right or wrong answer.
You could fix for 2 years in the hope interest rates will fall in that time, or alternatively interest rates could continue to rise. This would mean that you are faced with a higher payment when your deal ends. Alternatively, the longer fixed rate option (5 years) can provide more stability and the comfort of knowing how much your payment will be for a longer period of time.
The 5 year fixed rate option is currently the least expensive of these two scenarios, whereas it is normally the most expensive. This is because you are locking in for longer and you are paying for the added comfort of knowing what your monthly payment is going to be for a longer period of time.
The potential downside to this option is that if interest rates start to fall, you’re locked into the higher rate.
As you can see, it’s impossible to predict. The best advice is to go for the option that suits you best at the time.
Some lenders offer a 3 year fixed rate option that could be worth considering. It’s always recommended that you get professional advice to guide you through all of the available options to you.
To answer the question ‘when are interest rates going to come down?’ With inflation still high and uncertainty around the wider economy, it really is difficult to tell at the moment. Hopefully we will see them level off soon and then possibly come down in the near future, but there are never any guarantees.
My key tips:
Be prepared and have all your supporting documents ready
Engage with an independent mortgage broker/advisor as early as possible
Ask as many questions as possible so that you have a complete understanding of your options
Proceed with whichever mortgage option works best for you and your circumstances at the time, don’t be tempted to mirror what others are doing. Your circumstances are unique
Graeme Nichols is the Managing Director and mortgage specialist at West End Mortgages, an independent mortgage and insurance advice company, based in the West End of Glasgow, and working with clients across Glasgow, and throughout the rest of the UK.
Once a month he will share with Glasgow Live readers advice and tips on everything mortgages and the housing market.
West End Mortgages are authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on your mortgage.
