Why acting now can save you money on your future mortgage!

Last week in our Cheadle Property Market Update for October 2021 October market update blog we were intimating that there was likely to be an interest rate rise announced at the Bank of England Monetary Committee Policy meeting, which never came to be. The Governor of the Bank of England, Andrew Bailey thought it wasn’t the right time, but don’t be fooled: this is simply delaying the inevitable. With inflation expected to hit 5pc next year, there’s little chance a record-low 0.1pc interest rate will be around for long.

Rate Rises expected in the New Year

Borrowing costs are rising regardless of what policymakers are doing – a number of lenders withdrew a range of fixed priced mortgage products on the assumption that rates would rise and some went ahead with a slight increase anyway, which was unfortunate as the cost of living bites and the cost of everything from fuel to food has started to go up in cost. 

Rate rises are expected in the new year, if not just before Christmas, and millions will see outgoings increase when they can ill afford it, given that household debt is at a startling 145pc of disposable income, according to the Organisation for Economic Co-operation and Development. 

What impact on the housing market? 

Even small increases can cause costs to rise significantly, and this will hit every section of society. A YouGov survey found that 65pc of Britons would not be able to afford a £100 increase in monthly bills – including many middle-class households. Two in five of those earning between £60,000 and £70,000 would struggle. For those earning £100,000 or more, a third said they would be in financial difficulty if outgoings rose, so what will it be like for those on average earnings and how would a mortgage rate rise impact the housing market? 

Many experts are predicting a slow down in the rate of house price inflation in 2022, after the monumental rises in house prices during 2020 and 2021. They also anticipate an increase in available stock, which of course has been one of the biggest drivers of upward pressure on house prices, as people are forced to move into something more affordable. If there is an influx of property to the market, giving buyers more choice, it could bring some much-needed stability to the market and make buying a home a less stressful and fraught experience than it has been in 2021.

It may still be cheaper to buy now! 

Ironically though, it might still be cheaper to buy a home now that wait until the end of next year, by which time there may have been several mortgage rates rises and the cost of borrowing has escalated. 

Now is the time to get prepared. If you’re on a fixed-rate mortgage, you’ll be protected from rate rises for a while. (Although some people are not taking any chances and are paying early repayment fees to lock into a lower rate for longer) But if you’re on a tracker mortgage or “standard variable” rate or are nearing the end of a fixed-term deal, you can help mitigate the pain. 

Many financial experts are suggesting fixing for longer; offsetting your savings; getting a mortgage offer, even if you don’t use it; and adding value to your home.

At Maurice Kilbride we work with one of the largest independent brokers, the Mortgage Advice Bureau who would be happy to speak to anybody worrying or wanting advice, whether first time buyers or looking to re mortgage and fix your rate. 

You can call Joe, Patrick or Maurice on 0161 428 3663 and we would be happy to put you in touch or you can contact them directly via the link attached Mortgage Advice Bureau