This week’s podcast is all about the current state of the mortgage market following September’s mini budget. Anthony and Craig explore what’s happening.
It’s fair to say there’s a bit of chaos going on in the mortgage market right now. What’s happening?
There’s a lot of scaremongering in the media at the moment and some people are panicking about what’s going to happen. The main thing we want to say at this point is not to panic. Although some lenders are pulling rates, there’s still plenty of lenders out there that haven’t.
Right now things are changing constantly. And you might be worried that you can’t get a mortgage, you can’t buy the house you want. One of the changes within the Budget is to stamp duty, which we haven’t even talked about yet. So there’s a lot to think about at the moment, especially if you’re a first time buyer or if you’re thinking about moving.
This all highlights the importance of mortgage advisors. Rates are changing, they’re getting pulled, they’re going up and down. So talk to an advisor. We’ll go through everything with you. We’ll get the right rate booked in and secure it for you.
Panicking and getting the first thing you see online isn’t the right approach – that mortgage might not be right for you. I had a client earlier who found a rate online and then came to me. Not only did we beat the rate, but we realised they weren’t eligible for that product because it was a green mortgage. The property needed an A or B energy efficient rating – which they didn’t have. They could have lost weeks had they applied, only to be declined.
Where do you stand on this as a mortgage expert?
We’re in this field day in, day out. If you look online or on social media, mortgage brokers are all being reassuring and calming things down. On the face of it, it does look like chaos and disorder, but it’s not as bad as the press are making out.
Lenders pull rates all the time. It’s not normally a big media story when five or six big lenders pull a rate for a couple of days. Some lenders have a cap on how many mortgages or how much value they accept per day. So it happens quite often – lenders might pull out for a day and come back the next.
The media have just latched on to this in the current economic climate to make it seem more disastrous and chaotic than it actually is.
I’ve already submitted my mortgage application – what will happen?
We’ve had a lot of messages from clients worried that the lender can change the rate of the mortgage they have applied for. But the good news is that generally once you’ve put the application in, your interest rate is booked and shouldn’t change.
This is when you’ve gone through to a full application stage and the lender is either underwriting or waiting for a valuation. If you’ve applied for a variable rate mortgage, then obviously that doesn’t apply – your rate will change.
I’m about to move – could the lender pull my mortgage?
Some people who are literally due to move in at the weekend have contacted us, worried that their bank won’t lend them the money any more, or that they will change the rate. Clearly, that’s not the case. Once you’ve got your mortgage in writing then it’s good to go.
You will have the fixed rate you applied for.
Should I take out a 10 year fixed rate mortgage?
Normally people look at a two year or five year fixed rate mortgage. There are some three year fixed deals out there too, but they are less common.
More clients are certainly considering a 10 year deal now. In the past five years or so, people have chosen two to five years because they tend to think rates won’t change dramatically. But now people are coming back to us for a remortgage after a two year deal and wishing they had chosen a five or ten year deal.
Ten years could be something to consider, but you need to be certain that you’re not going to want to move house within that time. Or, if you do, that the mortgage is potentially portable. Obviously there are other reasons that a ten year deal might not work for you, but it is certainly not to be discredited. Lenders are actually offering slightly better interest rates on ten year deals than they are on two or five at the moment.
It’s important to think about what might happen in the next ten years. Might you want to downsize? It’s a long time to assume that you’re going to have any changes within your personal circumstances: your income, your work or anything like that. If you want to come out of your deal within ten years, you’re going to have to pay a fee. So what you potentially might save on the rates over the ten years, you might lose in an early repayment charge. These can run into several thousand pounds.
So be careful and don’t just go for the headline rate. It could be a risky approach. But, on the other hand, if stability is important to you and you can afford the payments on a ten year deal it could still be something to consider. I would definitely suggest you seek mortgage advice to help you make that decision.
What’s your advice on the disruption to the mortgage market?
The main thing we would like you to gain from this podcast is that there’s no need to panic. Don’t listen too much to the media, don’t panic buy or get confused by the chaos.
Speak to a broker – we’re calm and collected and we know what’s happening in the market. We can see the current trends, who’s lending and who’s not. We’ll explore all the rates and products to give you personalised advice for your situation.