With rising interest rates and increased living costs, it’s no surprise that many people are worried about their mortgage payments. Here’s what you need to know.
Whether you’re seeking to buy your first property, sell up and move to a new home or you’re coming to the end of a fixed-rate mortgage deal soon, you may be worried about recent developments in the market.
The Bank of England has increased its base rate no less than seven times since last December in a bid to combat inflation. The rate now stands at 2.25% and is expected to go up again when the next review takes place on 3 November.
And the recent market concerns have resulted in many mortgage products for new customers being withdrawn and banks increasing their rates on mortgages. Banks do this to ensure they aren’t losing money on mortgage loans and to ensure that they can continue to fund a mortgage for the entire life of the mortgage term.
While it’s understandable that rates have gone up, it doesn’t make life any easier for anyone already struggling financially.
Tracker rate mortgages
If you’re looking for a mortgage or your fixed-rate deal is due to end soon, you may be wondering if it’s cheaper at this point to get a tracker-rate mortgage. Tracker rate mortgages are linked to the Bank of England’s base rate, and therefore, their rates fluctuate. This means you’re not tied into a fixed-rate deal which may not be as competitive as it could be if rates were to come down in future.
At the time of writing, it’s true that tracker-rate mortgages currently offer cheaper rates than fixed-rate deals. The cheapest tracker rate – available to those buying a property with a 40% deposit – tracks the Bank of England Base Rate by +0.70%, giving a current rate payable of 2.95%. This is significantly lower than the cheapest five-year fixed rates, which now start with a 5.
What should you do? In short, you have to take your individual circumstances into consideration. Choosing a variable rate in this market requires confidence that you can afford to make payments that are likely to become higher than the monthly figure quoted today.
Plan ahead and prepare yourself for what your payments would be if interest rates were to increase to specific levels in the future. Above all, seek advice from an experienced mortgage broker who will explore your options with you and make a recommendation based on your circumstances and preferences.
During challenging times, expert advice is key and speaking to a broker rather than talking directly to a lender is crucial. If you go direct to a lender, you will only gain access to the mortgage products they have available at that time. Not only that, but you may find it difficult to reach an adviser and might have to wait several weeks before you can have a conversation.
The friendly team at MB Associates will usually be able to speak to you within a few days, giving you all the information you need to make an informed decision.
Contact us today for advice about your mortgage.