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Mortgage Market Update

Guest Blog by Tom Jackson, Managing Director of Cooper Associates Mortgages

What should I know about the mortgage market?

Since December 2021, the Bank of England has increased the base rate 14 times to try and reduce inflation back down to the 2% target. Currently sitting at 5.25%, it’s likely we haven’t reached the base rate peak yet – experts anticipate a further increase later in the year. 

While inflation is slowly but surely coming down, the past 18 months have been turbulent for many markets, including the mortgage market. This volatility has made it very hard for homeowners and homebuyers to know which way to turn with their property decisions. Thankfully, as we head into Q4 of 2023, things are looking more positive. 

Inflation is currently 6.8%; while still high, it’s far better than only 11 months ago where it reached a high of 11.1%. This decrease has made lenders feel a lot more confident, and they’ve begun to reduce their rates; some by up to 0.4%. 

Currently, a lot of mortgage rates sit at around the 6% mark which is where they’re likely to stay for quite some time; experts think until late 2024. Because of this, most first-time buyers and re-mortgagers are choosing to lock in for two years rather than five, in the hope that rates will begin to drop by the end of their next fixed-rate term. 

Should I be buying a house now?

No one knows what the future holds, and unfortunately even we don’t hold a crystal ball. So, saying if now is the right time to go ahead with a purchase isn’t a straightforward yes or no answer. However, what we can say is that there’ll always be a reason to put off making a purchase, especially if you’re approaching the market with caution. Property prices could go up as inflation comes down, or rates could go back up and house prices could plateau. There’s no saying what could happen.  

The answer? If you find a property that you love, and it is affordable, then it’s time to put an application for a mortgage in with your lender. 

I need to re-mortgage, now what?

It can feel daunting if you need to remortgage in the current climate because it’s likely you’ll need to pay a considerable amount more on a new deal, compared to the one you’re currently fixed to. 

However, there are some steps that you can take to ensure you secure the best deal, which includes making the most of the updated Mortgage Charter. 

Even if you tie into a new deal, make sure you continue to look for other deals that your lender might be offering. If they introduce a deal that’s cheaper than the one you tied into originally, you can make the switch up to two weeks before your initial fixed deal begins. 

If nothing cheaper becomes available, then you can be sure that you’ve tied into the best deal on the market with your lender.

What if I’m a landlord?

In 2016, a new law was introduced stating all second-home owners are required to pay 3% extra in stamp duty when they buy a property. Landlords also need to pay 20% on any buy-to-let income when they earn between £12,571 and £50,270. Anything over this is charged at 40%. 

Combine this with increased mortgage rates, and landlords are struggling to stay afloat without passing on the costs to their tenants; a choice not many are willing to make. 

What to do? Speak to a mortgage advisor about your options and ensure your current set up is working for you.

How do I cope with a mortgage increase?

Look closely at your budget first and foremost.  Little luxuries, such as Netflix and other subscriptions, may need to be put on hold for the short-term to give more disposable income. Secondly, don't be afraid to ask for help. The new Mortgage Charter has also added a clause that says speaking to your lender or bank to make a change to your payment structure, such as switching to interest-only for six months, won’t adversely affect your credit score. 

It’s better to address any issues sooner rather than later, and your lender is there to support you.

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Click here for more information and to enquire about Cooper Associates Mortgages fee-free, whole of market service.

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