As mortgage rates continue to rise in the face of stubbornly high inflation, expert guidance is more crucial than ever.
Worse-than-expected inflation data has certainly caused some housing market jitters in recent weeks but now remains a good time to lock in a mortgage deal guided by expert advice.
Headline inflation has remained at 8.7% leading some analysts to increase their forecasts of how much UK interest rates will go up. This has, not unexpectedly, played into lender actions. We have seen lenders raising rates throughout May and June with many products being pulled from sale so they could be repriced.
SWAP rates have increased following these inflation figures; the increase in lender interest rates has been fed by this as well as lender processing times. Increased business levels mean some lenders are increasing rates from a processing perspective rather than simply market fluctuations.
However, while it may seem wild and windy on top of the waves of the UK economy, underneath the waters are significantly calmer, and navigable with experienced captains.
Expert advice and guidance have never been more valuable – or valued – and this is reflected in the 8% increase in enquiries we received from April to May. Other notable figures include a 58% increase in buy-to-let enquiries (including buy-to-let purchases in a company name), a 38% increase in first-time borrower requests, and a 33% increase in the number of lifetime mortgage enquiries in the same period.
Looking to the near future
So where do we think the market is going from here, and what is the key advice to anyone either looking to buy or remortgage in the current climate? The answers – given what we’ve set out above – are cautiously optimistic.
If headline inflation drops as hoped, then we anticipate that the Monetary Policy Committee will take a more favourable view on interest rates in the months to come. Rates are projected to start dropping from Q2 of next year from a retail pricing view, as the retail rates tend to shift before the official bank rate does.
What does that mean for me?
Our key advice to clients in this climate is to hedge your bets – lock in a rate now, which we will be able to change for the full length of the offer period if rates do drop. This buys certainty while allowing flexibility.
While increasing rates have hit the headlines, what has not been so widely reported is that some lenders have also used this as an opportunity to make policy changes. Many lenders have increased their income multiples to 5.5x income and interest-only policies have also become more lenient.
Word on the street…
Significantly more of our clients are selecting two-year tracker rates in the hope of being able to take advantage of expected rate drops next year. With margins on trackers as low as 0.14% over base this offers an opportunity to take advantage of the market.
Meanwhile, experts across the industry are reporting a growing trend for mortgage terms substantially longer than the standard 25 years, as clients look into options to make borrowing what they need more affordable.
For more information, contact Courtney Flockhart, info@henrydannell.co.uk, 0204 5999 444.