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It’s not a great time for mortgage holders. The Bank of England raised the base rate by 0.5 percentage points to 5 per cent last week, and the core inflation figures recently published suggest the economic troubles aren’t going away quickly.

So if you’re feeling worried about your mortgage right now, you’re not alone. There are things that can be done, however, so here are five practical suggestions to help ease the panic.

You can extend your mortgage term

If you extend your mortgage term, it will lower your monthly repayments. The downside of this strategy is that you will have a mortgage to pay for a longer period of time, and that could cost you more in interest.

On the other hand, if interest rates come down at any point over the next few years, you may be able to remortgage onto a lower rate at that point. Potentially, if your financial circumstances have improved sufficiently by then, you could look at reducing your term back down again.

You can book a new rate six months ahead

If your current cheap deal is coming to an end this year and you are worried about rates rising further, you can lock in a new fixed rate deal now. This is because most mortgage deals can be booked six months in advance.

The good news is that, if between now and your current deal coming to an end rates do start to come down, you can change your mind about which deal you want to remortgage to. So you’ll get peace of mind now, knowing you’ve got a fixed rate that protects you against further rises. But equally, if rates do start to come down, you can look to change the product you’ve booked if a better deal does appear.

You can shop around for the cheapest deal

Although the average two-year fixed rate is 6.15 per cent and the average five-year fixed rate is 5.79 per cent, you may be able to find a market-leading fixed rate for 5 per cent or less, if you speak to a broker. This is particularly the case if your loan-to-value (LTV) – which is essentially the proportion of the overall cost of the property that the bank is lending on – is 60 per cent or less.

Even if your LTV was high (for example 90 per cent, meaning your deposit is 10 per cent) the last time you borrowed against your home, recent increases in house prices could mean that you will qualify for a more competitive deal when you come to remortgage.

It is particularly important to shop around for a cheaper deal if you have moved on to your lender’s standard variable rate (SVR), as most SVRs are usually at least two percentage points higher than the best buys available on the market.

You can plan ahead – and prepare

If you are still on a super low fixed rate, make the most of it either by putting money aside each month or possibly even overpaying the mortgage. That will put you in a better position when you do come to switch. Getting into the habit of allocating more of your monthly spend to your mortgage now will mean you do not have such a big shock when your current deal ends, and that will give you peace of mind. And if you put that money in a competitive savings account, you might even earn more interest on it than you’re paying on your mortgage.

You can ask to temporarily switch to interest-only

One of the easiest ways to cut your monthly mortgage payments is to ask your lender if you can temporarily switch from a repayment mortgage to an interest-only mortgage for six to 12 months. This strategy will cost you more in the end – and as you are no longer paying off your debt, you will move no closer to owning your home. But, as a temporary measure, it can be helpful as a way of significantly reducing your monthly outgoings.

Such a strategy should be considered a last resort. You will end up paying more in the end, but that may be better than struggling and bankrupting yourself now.

Lenders will typically only allow you to do this switch on a temporary basis, for example for six to 12 months. During this period, you may be able to increase your income, for example by getting a higher paid job, or you may decide to sell up and downsize so that you can afford to switch back to a repayment mortgage on your home. The good thing is, taking this step won’t affect your credit file, as long as you make your payments on time.

Source: Donna Ferguson of inews 25^th June 2023

 

The Government have set forward their Renters Reform Bill, which is now making its way through the Parliamentary process, with aims to be law by the end of 2023.

We’ve summarised the key proposals that will debated in the House of Lords and House of Commons. Continue reading to stay up to date.

Tenancy Reform 

• Fixed-term tenancies are ending and being replaced by periodic tenancies that don’t have an end date. Tenants will be able to leave the tenancy by giving two months’ notice
• Rent increases limited to one increase per year, a form must be completed by the landlord and served to the tenant with two months’ notice

End Of No-Fault Evictions 

• Under the new legislation, section 21 ‘no fault evictions’ will be abolished
• Landlords will only be able to evict tenants under certain circumstances under section 8 grounds

Private Rented Sector Ombudsman Portal 

• This independent body will oversee dispute resolutions, providing a fair and impartial platform for tenants and landlords alike
• Membership for landlords will be mandatory

Private Rental Property Portal  

• Landlords will be legally required to register themselves and their properties on a new property portal, created to help facilitate communications with tenants

Renting With Pets  

• Tenants will now have a legal right to request permission to keep pets in their rented homes. Landlords must consider these requests and cannot unreasonably refuse them.​​​​​​

Additional Measures 

• No blanket bans on renting to benefit claimants or families with children allowed

Applying the Decent Homes Standard to the PRS for the first time, ensuring that rented properties meet minimum quality requirements.

What’s Next?

We’ll keep you informed as the Bill makes its way through Parliament.

If you find that landlords require extra support, there is additional information on the government website and general PRS information on our blog.

Source: Paragon 30^th May 2023

 

• Santander and Barclays latest lenders to reduce rates
• Nationwide has reduced mortgage rates by up to 0.20% 
• Halifax’s reductions apply to mortgages arranged via brokers
• Average rates on fixed mortgages have continued to fall since November

Major mortgage lenders are reducing their rates, as the average cost of a fixed rate mortgage continues to fall from the highs seen last year.

Nationwide has reduced interest rates across its mortgage range by up to 0.2 per cent, with the cheapest fixed deal now at 4.34 per cent.

The price cuts include low-deposit mortgages, aimed at first time buyers, as well as remortgage products.

A five-year fixed rate on a 10 per cent deposit mortgage is now 4.79 per cent, with a £999 fee – a reduction of 0.1 per cent.

There is also a five-year fixed rate on a 40 per cent deposit mortgage at 4.34 per cent, reduced by 0.09 per cent. It also comes with a £999 fee.

Tracker rates have also come down by up to 0.2 per cent, on two, three and five year initial terms. A two-year tracker rate on a 40 per cent deposit is now 3.79 per cent with a £999 fee, reduced by 0.20 per cent.

This will hopefully trigger a new price war in the mortgage market, and about time too 

Will mortgage rates go below 4%? 

 Mortgage rates rose rapidly at the end of last year, thanks to uncertain economic conditions in the UK and the fallout from the disastrous mini-Budget in September, but they are now slowly falling. Interest on the average five-year fixed mortgage has dropped well below 6 per cent to 5.42 per cent, as more lenders reduce their rates. Two-year fixed rate deals are now at an average of 5.6 per cent, according to Moneyfacts. But the best deals available now are heading towards 4 per cent, with rates as low as 4.04 per cent on a 10-year fix for those with large deposits.

Halifax has also announced rate reductions across its product range for intermediaries. These are rates which are only available to those who go through a broker, rather than directly to the lender.  The reductions have been applied to fixed rates for home buyers including first time buyers and affordable housing schemes including shared ownership, as well as its range of green home products.

What to do if you need a mortgage?

 Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

 What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker. Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

By Fran Ivens For This Is Money

New sales activity in the housing market is holding up in the last week. High mortgage rates do not hit all buyers equally and I remain hopeful that borrowing costs will be lower as we start 2023.

 Key Takeaways

• It’s early days, but I remain optimistic that mortgage rates will be lower as we start 2023
• There are minimal chances of negative equity after strong post-pandemic price growth
• Sales are still being agreed in the last 2 weeks as those keen to move and with cheap mortgages in place continue with sales
• Higher mortgage rates do not hit everyone: 30% of sales are with cash and a further 20% are with smaller-sized mortgages
• For now, it’s like Christmas has come early for the housing market with lower activity from new buyers in the aftermath of the mini-budget.

1. I’m Hopeful Mortgage Rates Will Start To Fall Back Soon

This week’s reversal of tax cuts announced in the mini budget seems to have calmed the markets. Borrowing costs are starting to fall for government debt and the all-important interest rates that set the cost of a fixed-rate mortgage.

Mortgage rates for new borrowers remain over 6% but I believe there are very early signs that this could start to fall back further in the weeks ahead.

This is important as the outlook for the UK housing market next year really hinges on the level of mortgage rates for buyers entering the market from January 2023 onwards.

Our analysis has always suggested that mortgage rates of 4% were manageable for most buyers. Rates reaching 5% or higher would be more of a tipping point with the likelihood of some localised price falls and fewer sales.

Looking ahead, what really matters now is the outlook for inflation – in particular, how much more central banks need to increase the Bank Rate to bring inflation under control in the UK. We will know more in the next 2 weeks.

As soon as we get signs that inflation is starting to peak, the financial markets should start to take a very different outlook on borrowing costs. This will start to reduce the cost of 5-year mortgage rates which account for more than 60% of all new loans.

It’s early days, but I remain optimistic that mortgage rates will be lower than they currently are as we enter 2023.

However, home buyers need to realise that sub-2% mortgage rates are a thing of the past, enabled by cheap money over the last decade. 4% is likely to be the new normal for mortgage rates.

2. There Are Minimal Chances Of Negative Equity

Strong UK-wide house price growth over the pandemic has added to the equity buffer for homeowners. New borrowers have not relied on large mortgages to pay more for homes.

There is a huge equity buffer to absorb any reductions in sale price, and this will allow for the hit to buying power for new home buyers.

Find out how much your home is worth

We calculate that a nationwide 15% reduction in house prices from today’s levels would result in very few cases of negative equity for mortgaged sales up to the end of 2021.

This highlights how the UK housing market has become increasingly equity driven and is much less dependent on high loan-to-value (LTV) borrowing over 90%.

3. New sales are still being agreed despite uncertainty

 Looking back over the last week’s activity from homebuyers on Zoopla, we see that interest from new buyers continues to weaken – it’s down a further 8%. Those who haven’t managed to arrange cheaper mortgages are stepping back from the market, creating a sense that the Christmas seasonal slowdown has started early.

However, sellers and buyers continue to agree new sales across the UK. The rate at which new sales are being agreed is slowing – down 25% on this time last year – but sales have not stalled. This shows that there are committed buyers in the market who want to press on and secure a sale.

Mortgage rates are important for many buyers, but life-related decisions and other pressures will continue to bring a flow of buyers and sellers into the market. However, this is and will be at a slower pace than earlier in 2022.

4. 30% Of Sales Are Cash Buyers

Higher mortgage rates are deterring buyers who need a large mortgage to buy a home. But not everyone needs a large mortgage.

3 in every 10 home sales in the UK were paid for in cash last year. A further 20% of buyers use smaller-sized mortgages, and the increase in borrowing costs will be much smaller and less of a disincentive to move for them.

Cash buyers account for almost 40% of sales in the South West. But in London where prices are highest, less than 1 in 5 sales are paid for without a mortgage.

We have seen the proportion of cash buyers increase over the pandemic with more moves by older homeowners and those who have paid off their mortgage. Over half of all homeowners don’t have a mortgage at all.

However, most people buying a home do rely on a mortgage so the increase in rates is important for the UK housing market outlook.

By Richard Donnell of Zoopla

October 2022