With the Bank of England Base Rate at its highest in more than 14 years, homeowners and first-time buyers across the country may be concerned about what this could mean for present and future mortgage deals. However, while recent market trends are showing increased stability, Britons are urged to assess all of their options.
Despite the Bank of England Base Rate currently resting at a staggering four percent, lenders have been proving increasingly competitive over recent months with lower rates and more deals on the market.
Thomas Jackson, managing director at Cooper Associates Mortgages, told Express.co.uk: “Today we see rates 0.5 percent or less than just 30 days ago. [Lender’s] margins are being squeezed to obtain market share within a smaller market overall. Our prediction is to see rates relatively stable for a few months, see a slight increase in quarter two and then see a slight decrease later in the year.”
However, Mr Jackson noted: “There will be predictions agreeing, disagreeing and everything in between.”
And with this increased uncertainty, Tim Leonard, personal finance expert at NerdWallet, said: “People are understandably concerned. But unless your mortgage rate is coming to an end within the next few months, you should have adequate time to assess your options.”
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He continued: “Fixed mortgage rates have been falling in recent months, so there’s the potential they could get cheaper still. The risk, of course, is that they could just as easily start to move the other way and start rising again.
“The best thing people can do is look at their own circumstances, as everyone will be in a different position, and to get advice from an impartial expert.”
If you’ve got a mortgage
The first thing to do is not panic, Mr Leonard said. Those with fixed rate mortgages will not see monthly repayments change for the duration of the fixed rate term, even if the Base Rate rises.
However, he noted: “There will be more to consider if your fixed rate mortgage is about to come to an end and you want to remortgage to a new mortgage deal. This is because it’s likely that the new mortgage rates you see available will be higher than the mortgage rate you’re paying at present but about to leave.”
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For those whose current fixed rate mortgage is due to end within the next six months to a year, Mr Leonard suggested they might want to speak to a mortgage broker to find out what options are available.
He explained: “This is because you’re able to line up many fixed rate mortgages up to six months in advance of your current deal ending. If you secure a new mortgage now and rates increase in the next six months, you’ve got a lower rate in the bag. Alternatively, if you lock into a new deal now but find mortgage rates fall in the coming months, you could still apply for one of the lower-rate mortgages that have become available instead.”
The ten successive rises in the Base Rate seen since December 2021 are likely to have led to a notable increase in the monthly repayments for those on a variable or tracker mortgage over the past year.
However, depending on the person’s circumstances, they might be willing to continue with their current deal and hope the Base Rate rises are either at or near an end or that it could soon start to fall.
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For those who can’t afford to buy now, waiting to see if mortgage rates fall or things change in the property market are the main options.
Mr Leonard said: “House prices have been falling in recent months and property sales are slowing too, so there’s the potential for this to work in first-time buyers’ favour. Buying at a lower price could mean you need a smaller mortgage and make borrowing more affordable, while sellers might be more open to negotiating on price if they are finding it harder to secure a sale.
“Another option if you are trying to take your first step onto the property ladder and have family willing to help might be a guarantor mortgage. These are aimed at people with smaller deposits, lower earners and those with poor or no credit history, but can potentially be used by first-time buyers.”
This option does mean getting family, such as parents, to guarantee that they will cover the mortgage repayments should the person not be able to. This usually involves them, as guarantors, having to offer their savings or home as security for the mortgage.
Crucially, Mr Leonard noted: “If payments are missed, and neither party can pay, the guarantor is at risk of losing their savings or home as a result, so careful thought is needed before taking this type of mortgage out.”
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