It’s been a year of startling interest rate rises that have made life tough if you’ve been looking for a mortgage or remortgage. But there are signs that (thankfully) 2023 might bring slightly lower rates.
Last week (at time of writing) something important happened. At least, it’s important if you’re wanting a mortgage or remortgage anytime soon. Interest rates crept under 6% for the first time since October.
Better still, Zoopla expects them to fall further, saying: “Mortgage rates are expected to fall to 4-5% next year.”
Will mortgage rates definitely fall?
Not definitely. At the start of 2022 mortgage rates were hovering around 2%. Back then we couldn’t have predicted an invasion of Ukraine and the havoc Russia wreaked, nor could we have anticipated the events closer to home in the autumn which sent global markets into a state of shock.
So there’s no guarantee rates will fall. There’s always the potential for domestic or global events to send things into a tailspin, and while the world continues to try and put a lid on inflation there’s always the risk of further increases.
But assuming none of that happens, a growing numbeIt seems strange to suggest that a war some 1500 miles away is having an effect on your mortgage choices. But it is. Key Mortgage’s Sharon Duckworth explains why the mortgage market is in such a mess right now, and what you can do about it if you’re looking for a mortgage/remortgage.
Before I press on with this post, I’d best preface it with an important note. The mortgage market in the UK is being indirectly affected by the Russia/Ukraine conflict. Clearly, that’s a very, very long way from the most important consequence of the war, and nothing in what follows should detract from what’s unfolding in Ukraine. However, if you’re looking for a mortgage right now, you’ll probably be scratching your head as to how a decision by Vladimir Putin could possibly have affected your plans.
So here’s the story so far.
How can the Ukraine war affect your mortgage?
It all comes down to uncertainty. Financial markets hate it. And right now, there’s a lot to be uncertain about. As the war has progressed, you’ll have seen energy, fuel and food costs going up. That’s inflation in action, and the way the Bank of England (BoE) has tended to deal with that is by raising interest rates.
If the BoE raises the base rate, mortgage lenders will raise their rates too.
Usually, lenders have a reasonably clear view of what’s coming down the track over the next few months. If they introduce a new mortgage product today, they’ll feel pretty confident that they won’t regret offering it. But the war, and its effect on inflation, have made that more difficult. They don’t want to offer lots of new fixed rate mortgages at a time when interest rates are likely to increase further, because they don’t want to suddenly find themselves on the wrong end of a bad deal.
That’s why, according to inews, the average mortgage shelf life has dropped from 42 days to just 28. That just goes to show how uncertain things are right now. And as you might expect, it has meant that, rather than offering lots of mortgage products they’ll probably have to withdraw within a month, they’re sitting tight, cutting back on the mortgages they’re offering, and waiting for brighter days. About 500 mortgage products disappeared in February alone. That’s about 10% of the total. If Tesco got rid of 10% of its stock overnight, you’d notice it.
Why a mortgage broker matters more than ever
So, how are the above issues affecting your chances of getting a mortgage, and what can you do about it?
To take the second point first, talk to a mortgage broker. That really has never mattered more than ever, and it’s the best way to boost your chances of success. Here’s why:
1. Get a clear view of a fast-changing market
You probably don’t have time to keep an eye on what mortgage products are being introduced and removed, especially in a market moving so quickly. We do, and we can filter products to search for the cheapest options for you.
2. Lock in the mortgage you want
The last thing you want is to have found your perfect mortgage only for it to be withdrawn before you can complete the application process. But that’s what’s happening to lots of people right now because some mortgage products are hanging around for just days.
· Using a broker means you’ll get an appointment quicker. We could talk to you today or tomorrow. Your bank could take weeks, by which time the product may well have disappeared.
· We can progress applications faster, so you can secure the product you want more easily. That’s because many lenders have departments dedicated to broker business because we put so much work their way – so it will be a faster process than doing it yourself.
· We get notifications of product withdrawals, so we can tell you whether an application is worth pursing and, if so, get it done fast and ahead of deadline.
3. Increase the chances of your application being accepted
We’ve spoken about this before but it’s particularly relevant now. Before any lender will lend, they’ll want to do a credit check. Each check on your record (over a short period of time) will reduce the chances of success for the next one.
Ideally, you only want to have one credit check but the more volatile the market, the less chance there is of that happening. Use a mortgage broker and we can steer your application to the lender with whom you’ll have the greatest chance of success.
4. Access cheaper mortgages
Even though the products available are not as cheap as they have been in the recent past, you’ll still find a cheaper deal with a broker than without. That’s because most lenders offer brokers exclusives, and we can pass those discounts on to you.
It’s not easy to get a mortgage right now. But you’ll do your chances a world of good when you talk to a broker. Let’s prove it. Give us a call now.
