Andy Henry from Kennedy Mortgage Practice answers your questions on current mortgage rates.
In the last two months, there has been a huge drop in consumer confidence surrounding mortgage rates and house purchases. This came around the time of the Governments ‘mini budget’ on the 23rd September 2022. This saw increased concern over mortgage rates, interest rates and property value.
Below, Andy Henry answers your questions and offers his advice for those currently looking to apply for a mortgage or are considering remortgaging.
What is happening with current mortgage rates?
Mortgage rates are rapidly changing week on week at the moment. On 26th October, average rates on two year and five year fixed mortgages reached a high of 6.5% and 6.36%. Now these stand at 6.25% and 6.05% respectively. Whilst the cheapest two and five year fixed-rate mortgages were 5.6% and 5.35% on 26th October, now these figures stand at 5.07% and 4.89%.
Contrary to believe, tracker mortgages are also making a come back. Many consumers are now prepared to take the risk as rates aren’t predicted to peak at the levels expected after the mini budget.
Whilst rates remain higher, lenders are now looking like they will drop rates even further in the coming weeks/months. This is great news for people looking to move or are coming to the end of their current mortgage deal.
What is your current advice to first time buyers who were planning to purchase a property next year?
I would say to anyone looking to buy a property, make sure you have done your homework first.
Everyone will be in a different financial position and will need to carefully consider and plan for the long term. If you find the property of your dreams, and have a good stable income and deposit, then go for it. If you know you can afford the mortgage on today’s rates then definitely make the investment!
I would recommend speaking to a broker to run through a detailed financial plan. This will ensure that, what you are committing to is affordable and inline with your long term goals. This way you will never overstretch yourself and find yourself in hot water.
Which mortgage types are currently most popular and why?
Over the last few years fixed rates have been extremely low, with some being below 1%. This meant most buyers were opting for the longer term stability in 5 year fixed rates, some even taking 10 year deals. Whilst this was a good idea then, we are now seeing a shift towards shorter term deals. For example, 2 year fixed rates and even tracker mortgages.
Tracker mortgages are starting at 3.35% for clients with bigger deposits. Meaning whilst the base rate is predicted to rise in the Spring, they are still lower than the fixed rates currently offered. Most come with no early repayment penalties, meaning they can by switched to a fixed rate deal should these rates continue to fall.
This means people are taking advantage of the lower rates with the peace of mind that they can fix if they need to.
People sometimes get confused when they talk about their mortgage offers and whether they can be withdrawn or not.
When I go through the initial process of getting a mortgage agreed in principle, I look at the best deals available at that time. However, this does not necessarily mean that this will be the best deal at the time when an application is submitted. I always make sure I explain this thoroughly to make sure there is no confusion, as at this point the rates offered can and do change. Remember this is an agreement in principle not an application!
Once a formal application has been submitted, the rate is secured and the formal mortgage offer will reflect this. This will only change if there are changes to the property price along the way. This then, in turn, may change the rate!
Once the mortgage offer is released, most have a 6 month window to complete. Contrary to what some believe, it is very rare a lender will withdraw this offer during this 6 month period. This will only change if they are informed of a material change to the buyer’s circumstances e.g. a change of job. If this is the case, they may reassess affordability to make sure the mortgage offered is still within criteria. They won’t however just withdraw an offer for no reason.
One thing to be aware of though is lenders may do a last minute credit search.This is to check no further credit has been taken out prior to releasing the mortgage funds!
In summary, the mortgage rates are improving. Lenders still want to help both first time buyers on to the ladder and people move up the ladder!
Are you looking for further professional advice?
If you are looking to gain mortgage advice, Howkins & Harrison recommends you contact Andy Henry.
Alternatively, if you are looking to purchase or sell a property and require some help, please contact one of our sales teams.
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