Borrowers Advised To Act Early To Lock In Mortgage Rates

October 22, 2022

The housing market has been through turmoil in recent weeks, as house prices begin to stagnate and mortgage rates climbed steeply. The modest cut in stamp duty announced by the Chancellor in his mini budget is not expected to do much to offset rising costs for home mover and first-time buyers.

Anyone who needs to remortgage in the next six to nine months, because their current deal is coming to an end, is advised to act now to try and lock in a deal. This is because rates are expected to continue climbing sharply over the next six months to a year, and in recent days lenders have pulled hundreds of mortgage products from the market.

Currently some five-year deals are offering better rates than two-year fixed deals, but the picture is changing fast, to it is hard to make any predictions. Borrowers are advised to seek remortgaging advice from an experienced mortgage broker, who will be able to have exclusive access and up to date insights into which are the best deals.

Most lenders mortgage offers are valid for six months, so first time buyers are advised to contact a mortgage broker and arrange a deal in principle before they start house hunting. Some good news for those taking their first step on the property ladder is that house prices are beginning to fall, and they may find the housing market is less competitive than of late.

However, any advantages may be counteracted by a reduction in the number of 95% mortgages on offer, which require a 5% deposit. The Guardian reports that this is because lenders are now more concerned about the risk of negative equity.

Negative equity happens when the value of the house falls below the mortgage taken out on it, which may be a risk at the moment, after a period of inflated house prices followed by a potential crash.

For example, if the buyers took out a £180,000 mortgage on a house that cost £200,000, and now the market value of the house is £150,000, they are in negative equity. While an unwelcome circumstance, it only becomes a real problem if the householder wants to sell up and move.

It’s not an impossible situation, but anyone in this position is advised to seek professional advice. Some specialist lenders are willing to offer negative equity mortgages. How good the deal is may be affected by the amount of negative equity involved, how much deposit can be put forward on a new property, and if the current mortgage is in arrears or not.

Negative equity can also be tackled by overpaying on the current mortgage, or using savings to make up the shortfall. Another solution might be to rent out the home to raise funds, if you are able to stay with friends or family for a while.

Anyone seeking to buy their first home should take the trouble to have it independently valued, to make sure they are paying a fair market price for it. They should avoid overstretching themselves, to allow some room to accommodate likely future interest rate rises.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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