Your mortgage questions answered

In this article, your mortgage questions are answered.

Most of our conversations with clients focus on whether now is still a good time to buy a new house or remortgage to a new deal. However, the latest increases in the Bank of England interest rates and the current cost-of-living crisis are causing concern for many homeowners and potential buyers who may be worried about what this means for the housing market.

Using the latest Money Statistics (May 2023) from the Money Charity, here are the answers to the questions that you need to know.

Are house prices falling?

This is a mixed question.

Homeowners, especially First Time Buyers (FTB), may want to see house prices fall because it allows them to stretch their money further. But equally, no one wants to see a market crash because it could lead to negative equity.

According to stats released by Nationwide, house prices grew by 0.5% in April 2023, although they were still 2.7% lower than in April 2022. However, Halifax suggests the average UK house price grew by 1.3% in the three months to April 2023.

This suggests to us that house prices remain relatively stable. Of course, prices aren’t rising as quickly as they did between 2020-2022, but we’re not seeing a huge fall either.

However, first-time buyers are seeing a definite increase in house prices. The average house price for FTBs currently stands at £238,742 (source: HM Land Registry). The Money Charity statistics confirm a “5% increase in the average first-time buyer house price in the year to February 2023.”.

How long will it take me to save up for a deposit?

If you currently rent, the good news is Skipton Building Society recently launched a deposit-free mortgage for renters. This is excellent news and a much-needed shift in the mortgage market to help renters with a proven track record take their first steps onto the property ladder.

The average deposit for a house currently stands at 23% of the purchase cost (source: UK Finance). For an average house price, this would mean you need to have at least £53,911 for a deposit.

According to the Money Charity, saving up for a deposit will take 16 years if you have an average income and are saving at an average rate.

This is why the new Skipton Building Society Track Record Mortgage is such a game-changer. It will give a considerable lifeline to people dreaming of owning their own homes.

Are mortgage lenders still willing to lend?

Mortgage lenders are being more cautious right now, and affordability checks are essential, but the mortgage market is still buoyant.

In December 2022, there were 35,612 mortgage approvals in the UK. This is a significant drop from 74,425 in August 2022 (Source: Money.co.uk), but the decline could have been a reaction to the turbulence caused by the mini-budget in September 2022.

One of the reasons why so many people choose to talk to us is because we have access to deals across the whole market. We work with niche lenders as well as recognisable high-street names. So we are confident we can find a mortgage solution for you.

What is the average mortgage rate right now?

Your mortgage rate depends on what type of mortgage you have (fixed-rate, tracker, Standard Variable Rate (SVR)), your Loan To Value (how much deposit you have compared to the cost of your new home), and how long you have left to pay off your mortgage.

At the end of March 2023, the average interest rate was 2.75%. For new loans, it was 4.44%.

While these interest rates are significantly higher than the sub-2% rates we’ve become used to, they are still historically low, especially compared to pre-2008 mortgage rates.

As part of our affordability checks, we will always stress test your finances against rising interest rates to confirm you can afford your mortgage even if rates continue to increase.

What is the average house price in the UK?

According to Halifax, in April 2023, the average house price was £286,896.

The Land Registry (which lags slightly behind) confirms the average house price for FTBs in February 2023 was £238,742.

Will rising interest rates impact my mortgage repayments?

At the start of the year, the Office for National Statistics confirmed 1.4m households would need to renew their fixed rates this year. If you are still on a fixed-rate deal, you will have been sheltered from the immediate impact of rising interest rates, but it could come as a shock when it’s time to find a new deal.

Changing interest rates are having an immediate impact on current deals. Already, the “average two-year fixed-rate mortgage deal is £35 a month more expensive than a few weeks ago” (source: BBC).

If you have six months left on your current mortgage, now is the time to start looking at new deals rather than waiting to transfer onto your lender’s current SVR, which will almost certainly be at a higher interest rate.

We don’t want you to have to pay a penny more than you need to when it comes to mortgage repayments. Our expert mortgage advisers will check what options are available. We can review your finances against further rate rises and help to figure out if you could save money by changing your mortgage term or reducing your LTV.

Talk to The Mortgage Expert about your mortgage concerns

If you are worried about your mortgage or have any questions about affordability, please get in touch.

Our team are here to help answer any questions you may have and can help you take your first steps onto the property ladder.

Call us now on 01582 450000.

Alternatively, why not contact us and book a time that suits you?

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE