So, first of all, let’s all settle down, grab a cup of coffee (perhaps a biscuit as well) and look clearly at what is happening in the mortgage market. Rates are rising, house prices are slowing down, and it’s all changing so quickly. All these things are true but putting them into context is often difficult. So here are a few thoughts that may help bring a little perspective to things.
Mortgages make good headlines
The media really don’t help with perspective sometimes. In fairness to them, it’s unlikely that this is due to some sort of wild desire to cause panic or because of a secret conspiracy to promote chaos. The bottom line is mortgages are news and people need to be informed about the general situation. Just remember that they are also trying to sell papers or get viewers, so a little drama helps with that. Things are rarely as bad as they seem, and this situation is no different. Yes, rates are rising, and yes house prices are not increasing the way they were. However, what matters is what that means to you, so you need to read past the headlines a little to get a balanced view. The Navy Seals have a saying, ‘calm is contagious’ which is very appropriate here. Honestly, things are not as bad as they seem.
The mortgage market bounces up and down all the time
The rate that underpins mortgage offers changes regularly. In recent years that change has been slow and steady. Most importantly, it has also consisted of small, almost unnoticeable changes to the base rate. It bounces all the time. The difference now is that the bounce is bigger and more noticeable because it is working in a faster cycle, and the changes in rates have been higher. This creates a feeling of a rapid rise in mortgage costs. There are a few things to put in the mix, though.
- The cycle of change for mortgages is complex
Essentially what happens is the lenders create a pot of money to use for new mortgages. The rates at that point are used to create deals that are then offered to the public to allow them to access that pot of money. The pot and deals are emptying and being changed faster at the moment. That is why things seem to be suddenly changing overnight. They aren’t, we are just all used to a longer cycle.
- Interest rates are still lower than in the past
Again, here it feels as if the rates are relatively higher because the Bank of England has been holding them at a very low level for so long. In the past, we have seen interest rates much higher than this, and the housing market has continued.
- The deals are still there
Let’s remind ourselves of one important thing. The reason mortgage companies lend money is to make money from the loan. They are not going to stop lending money; they will just be influenced by the current market in how they do it. Talk to us; let’s see what is around. Someone somewhere probably has the right deal for you.
Things are nowhere near as difficult as the headlines and the worst of the doom-mongers would have you believe. Remember, mortgage brokers deal with fluctuations and changes all the time, you just don’t usually see it happening.
What does it all mean to you?
So, what should you do if you are looking at mortgage changes in the current climate? First of all, let’s go back to the message that calm is contagious. Sit down with a broker and calmly assess your options. We know the market and we know how it works, so I think it is fair to say we are a better source of information than the tabloids or social media.
- Current offers are not likely to be withdrawn. If you application is advanced enough that you have had an offer from a lender it is very unlikely that it will be taken away from you.
- Don’t sit and wait for changes because they may not come, or they may make things worse. It’s a real gamble to base a decision on ‘what could be next’ rather than ‘what is real now’. The current rate is certain; what it will be next week is not. The current deals are available now and may not be tomorrow. Of course, there is a chance that the rate may drop, but that is always the case.
- If you are remortgaging, then the principle of looking for the right deal hasn’t changed. You are still looking to improve your situation and get a better option.
- Rates are still rather low. At the time of writing the current interest rate is at 2.25% and variable mortgage rate is 4.25%. Again, let’s get some perspective on the reality of this. In 2007 that was around 5.5% and 7.59%. I think that says it all.
In the final analysis, the rates are still relatively low, there are still deals to be had, the money for mortgages is still there, and the housing market is still viable.
We have been doing this for a long time, call us and let’s look at what works for you. If it turns out now is not the right time to buy, move, or re-mortgage, we will soon find out, but if it is, then we can help you through all the noise to the right choice.