Mark Seddon, Mortgage Adviser in Hitchin said:
“With mortgage rates once again hitting 6%, as a homeowner in Hitchin, Stevenage, or Letchworth, you may be rightly worried. In this article, I will explain your mortgage options and why speaking to a mortgage adviser is so important right now.”
The backdrop of mortgage rate increases
Since December 2021, the Bank of England has been raising the base interest rate in order to tackle the ongoing inflation issue. These interest rate increases have been made 13 times consecutively and have now reached 5%.
Naturally, the increases have had a dramatic effect on the mortgage market. Mortgage repayments for those on Standard Variable Rates or Tracker Mortgages have already increased. Many mortgage products have been removed from the market by lenders needing to adjust their offers as a result of the BoE's increases.
With such uncertainty in the market as to where interest rates will go in the future, it is important that you understand your personal circumstances to help you make the right decision for you. It is therefore important that you speak with a professional local mortgage broker for advice and help in making the next steps forward.
Here are some steps you can take now to help your mortgage decisions:
Is it possible to remortgage early?
A common question our mortgage team are asked is, "Can I remortgage early to get a lower rate?"
It is possible to get a new deal in principle if your current mortgage is due to expire within the next six months. This six-month period allows you to assess the market again before taking your mortgage deal. If the market has changed in that time and better deals are available, you will be able to reapply for the better rate. However, if rates have increased further, your mortgage agreement in principle will still be valid.
However, if homeowners are looking at breaking their existing deal early, there can often be an early redemption fee to be paid. Therefore, it would be beneficial to speak with our mortgage advisers to assess your current mortgage deal terms and conditions to determine if the switch would be financially worthwhile.
Our mortgage advisers can help with a wide range of different mortgage types to fit your situation. These include first-time buyers, remortgages, and those moving home. We also help investors in the buy-to-let market.
Should I fix my mortgage, if so, for how long?
We also get asked how long to fix a mortgage rate for. This is a more complicated question to answer as there are a number of factors that need to be considered.
For example, if your loan-to-value (LTV) is low, you have the potential to secure a more favourable mortgage rate. Also, generally speaking, the longer the mortgage is fixed for, the lower the interest rates may be. While this provides a stable repayment structure, if the Bank of England then reduces the rates to lower than you've fixed for, there can be a large early repayment fee to pay if you want to remortgage again.
It would be important to discuss the options with our professional mortgage advisers as to the length to fix as there are 2-year, 5-year, 10-year, and some for longer. Finding the most suitable fixed rate mortgage will depend on all your specific financial circumstances.
Should I consider a variable rate mortgage?
One of the key benefits of taking a tracker mortgage is that your interest rates will fall if the Bank of England reduces the base rate. If you are in a position where having a set repayment amount is not necessary, then a tracker mortgage could suit you.
However, it must be noted that if the Bank of England raises interest rates, which has happened frequently recently, then tracker mortgages could be a lot more expensive.
It is worth noting that the mortgage market is complex. Here at Fortune Financial, our mortgage advisers are highly experienced and understand the dynamics of the market so can offer you personalised mortgage advice.
I hope this article has been helpful. If you have any further questions, please do not hesitate to contact us.
Director and Mortgage Adviser, Fortune Financial, Hitchin