Will Brexit put mortgage rates up?
After the interest rate rise in August 2018, the Bank of England Monetary Policy Committee has taken the unanimous decision to hold rates at 0.75 per cent at its September meeting. The decision offers some assurance to homeowners with mortgages, with the MPC saying future rate increases are ‘likely to be gradual and limited’.
The MPC’s decision – which is good news for those who are looking to take a mortgage, remortgage or secure property finance for a self-build or development – has been influenced by current uncertainty around Brexit and many economists are predicting that the Bank of England will not raise rates again before Brexit.
More positively, the Bank of England has upgraded its growth forecast from 0.4 per cent to 0.5 per cent for the third quarter, and the UK economy was boosted by the summer’s record temperature and the World Cup among other factors.
Why now is the right time for a mortgage review
So, with uncertainty over the progress of a Brexit deal, what action should homeowners and prospective homeowners take when reviewing their property finance?
“At any time, but particularly when there is uncertainty about future interest rate rises, it’s vital to take professional advice about your mortgage to ensure you are getting the best deal,” says NM Finance director Max Mace. “Work with a mortgage broker such as ourselves which has access to whole of market as this ensures you truly do get the best advice, rather than a broker that works with a limited panel of lenders.
“Although interest rates are obviously key to the affordability of a mortgage, an applicant’s personal circumstances are the main consideration of what action to take. NM Finance can advise on the best product to suit your personal needs.
First-time buyers and Brexit
“For example, reduced loan to value (LTV) rates have created new opportunities for first-time buyers, giving many more people a great moment to get onto the property ladder. Although we would always remind people to consider what an increase to interest rates would mean to their monthly budget, the signs are that movement will be carefully measured and slowly implemented.
Fixing your mortgage rate before Brexit (even if you’re already in a fixed rate deal)
“For those currently on a fixed rate mortgage, it is worth regularly reviewing this against the market and, so long as there are no penalties in place, looking to switch early to secure a new fixed deal while the rate remains low, ahead of market rises. As a reminder, it’s sensible to talk to your mortgage adviser at least six months before your current fixed rate ends to fully research and manage any transition with plenty of time for the process.
The risk of remaining on standard variable rate
“And my absolute advice for anyone currently on a standard variable rate is to speak with NM Finance about a fixed rate mortgage which offers financial savings to their monthly household budget. Unless a homeowner is looking to move imminently or has a particular need to keep their finances fluid, a fixed rate is worth considering.
“Our team is constantly reviewing the market and products from lenders, so we are expertly positioned to help property owners and investors to get the best finance product available.”
Addendum January 2019
Since publishing our article, What should I do about my mortgage ahead of Brexit?, in September 2018, the implications of a hard or soft Brexit remain unknown. With just under three months until the UK ends its membership of the European Union, the effects of this unparalleled event on the financial markets has yet to play out. Over the past few months, NM Finance has been asked by many clients what action they should take regarding their property finance. Here are our thoughts on three scenarios of current clients.
Should I buy my first property before or after Brexit?
The current market is extremely favourable for first-time buyers (FTBs). While every applicant will need a good credit history, a deposit and to have stress-checked their mortgage affordability, there are some incredible FTB mortgage products available with some lenders offering up to 95 per cent loan to value (LTV). Combine favourable lending with a flattened market in some areas around the UK, and it appears to be something of a buyer’s market at the time of writing. However, investing sensibly and with good, balanced advice from an independent, whole-of-market mortgage broker such as NM Finance will ensure that you make a decision which you can afford however Brexit plays out.
- How first time buyers can improve their chances of getting a mortgage offer
- The changing nature of first time buyers
Should I invest in a property ahead of Brexit?
The short answer is that if you view property as a long-term investment, and can afford to make the monthly repayments, any short-term fluctuation triggered by Brexit is likely to correct itself within five to ten years.
If you are considering a short-term investment, the market may be more volatile over the next few months and you should be prepared that property value and interest rates may incur some movement as things adjust post-Brexit.
However, there are a wide range of flexible mortgage products available with lending specifically for property investors and developers, so speak with one of our property experts on 01603 258268 or request a callback to find out more about exclusive offers available to NM Finance clients.
Should I switch to a fixed rate mortgage ahead of Brexit?
As our previous article indicated, NM Finance’s advice is to consider a fixed rate mortgage if your current mortgage is a standard variable rate, or your existing fixed rate is due to end in the period leading up to Brexit. Interest rates are at an all-time low, and lenders have a wide range of mortgage products that are far more flexible than fixed rate lending in the past.
Experts and pundits have made far-reaching predictions surrounding the possible impact of Brexit on the property sector, but one independent voice was that of consumer advice guru Money Saving Expert Martin Lewis, who spoke on the subject in December. He said: “A fixed rate mortgage is by definition ‘certain’. If you want certainty in these uncertain time, that’s what it does. Mortgage rates are still near historic lows. There isn’t that much room for interest rates to drop, and lots of room for them to rise.”