What You Need to Know About the Mortgage Industry Today
What is happening in the mortgage industry at the moment and why are landlords so worried?
Due to the ongoing instability of the financial markets, the mortgage industry continues to experience unprecedented levels of uncertainty with interest rates still rising and many rates and products being pulled.
Not knowing how much your monthly mortgage payments will be in the future makes it very difficult to plan, with landlords not being able to predict how much profit they’ll make, or if they’ll be able to afford to keep their property.
What can landlords with fixed mortgage rates do if their rate is about to expire?
First things first, book a call with your mortgage advisor, it’s possible that they could secure you a fixed rate for a further six months.
With rates trending upwards, and likely to continue that way for some time yet, this could be your best option. And if rates do start to decrease (fingers crossed!), you can always go back to your adviser who will be able to revisit your case and secure you a better rate.
Will rates continue to rise over the next few years?
It’s the million dollar question and Neil Ambrose, a mortgage advisor with 17 years of experience in the industry, unsurprisingly, said, ‘It’s a difficult question to answer’, advising those who are concerned about the long-term to consider switching to tracker mortgages, which is a mortgage where the interest rate is based on an external rate (usually the Bank of England base rate) and a set percentage.
Those on tracker mortgages will pay more if and when interest rates rise, but benefit when base rates come down, whereas those on a fixed rate could be locked into fixed rates for years and miss out on interest rate drops.
As there is no way of knowing if the rates will continue to rise and how high, there is also no way to know if the rates will drop, so it’s something you should think about carefully, before making the leap.
Neil added that, although rates continue to increase, ‘we don’t expect them to go much further than they are now, as that would soon become unaffordable for everybody.’
Should landlords consider paying a redemption fee?
A redemption fee is a percentage of a person’s outstanding mortgage balance that is paid as a charge if you repay your loan earlier than the original final repayment date.
Whether this option is worth it depends very much on:
- The individual person’s financial situation
- The mortgage arrangement plan that they have
- Whether it makes sense for them personally to absorb the fee in order to lock in a new rate
For first-time buyers, is it worth waiting to purchase a property?
Rob Winfield, mortgage adviser for Mashroom, responded, saying that, depending on your individual circumstances, ‘I’d probably say no, to be honest. If you need something there is still a higher demand than there is supply, so there are still hundreds of people that want to get onto the property ladder.’
Acknowledging that no-one can predict what might happen next, Rob’s advice at present would still be, ‘if you need it, buy it!’
Are property prices changing?
Neil and Rob both say that prices themselves have so far remained relatively steady amidst the turbulence that surrounds them, with the main difference noted rather being an increase in the time between a property going on the market and when it is sold.
Can my mortgage lender retract an offer that’s already been made?
Although it is an extremely unusual practice, unfortunately there is always the possibility – right up until the moment that funds are released, and even if you have already exchanged – that an offer could be retracted, as laid out in the terms and conditions under which mortgages are lent.
What should I do if my mortgage offer is retracted?
If you find yourself in this difficult and rare situation, Rob says:
We would typically advise you re-broker it. (…) If it was to happen after exchange, that is where it becomes a little bit sticky. You are legally bound so we would re-broker and hopefully place it with another broker.
What can landlords and first-time-buyers do to protect themselves, now and in the future?
With uncertain and changeable times still ahead, it’s never been more important to have a solid source of up-to-date information from experts who understand the industry inside out. That’s why having a mortgage professional by your side is essential in these unprecedented times.
A broker can help prevent mortgage offers from being withdrawn for new buyers, and provide assistance to adjust rates and types of agreements for existing property owners.
Rob and Neil say: ‘For landlords out there, speaking to a broker can help you understand exactly what your risk is and any cost implications of interest rates going up, so our best advice would be to speak to a broker as fast as you can.’