Moderate economic growth, combined with a lack of available properties has put the housing market in a unique place at the start of 2018. At the end of last year, mortgage approvals hit the lowest levels seen in three years. Despite this, experts are anticipating slow, steady growth for the remaining months of the year. Their optimism is cautious though since the market is highly susceptible to outside influences – Brexit in particular is likely to have a big impact over the next year.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
It is still an ideal time to buy?
Last year, the Bank of England raised its bank rate by 0.25%, with the Deputy Governor warning of the likelihood of more increases. The possibility that mortgage costs would rise has caused the market to remain stagnant, forcing lenders to keep interest rates low. This makes it an ideal time to borrow since lenders will be competing heavily for business.
Most lenders are offering 5 year fixed rates at around 2% for borrowers with a 15% deposit. Borrowers will want to lock in these low rates to ensure their monthly repayments stay low for as long as possible.
Buyers looking for two year fixed rates that have a 10% deposit will also be able to find attractive deals. To save time shopping around for the best rates, a mortgage adviser will be able to help you find the right lender and get the best deal available.
Fixed mortgage rates depend on a variety of considerations, such as the availability of reasonably priced capital available to the lender. Ordinarily, this money comes from customers with savings. However, a lender could take advantage of “swap rates” with other banks for short term borrowing.
These rates fluctuate based on interest rate predictions and inflation. Economic and political factors, such as elections and most recently, Brexit negotiations, also affect swap rates. Currently, swap rates are high, so mortgage rates are expected to increase as a result. The housing market’s saving grace remains competition between lenders.
Low mortgage rates will not stay around forever
The Bank of England will of course be monitoring the market. They have cautioned that if house prices get out of control due to low mortgage rates, they will impose restrictions on banks to curtail the issue through increasing costs or capital requirements. The expectation is that these costs would be passed on to borrowers through higher interest rates.
Variable mortgage rates can change, which means borrowers have no guarantee about how much their repayments will be every month. Fixed-rate mortgages help borrowers avoid the consequences of an unstable market and the whims of the Bank of England since interest rates won’t change during your introductory period.
Inevitably though, lenders will raise rates after this period which may surprise borrowers – even the slightest percentage increase can mean hundreds of pounds in additional mortgage costs annually.
In the ever-changing market, rates may increase at any time so ensure you are prepared.
Could you save money on your mortgage?
Low rates may not be around forever. Take action whilst you may be able to save money. For mortgage advice from an independent mortgage broker, contact Chris.
Tel: 01403 780 770
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