Mortgage Rates on the Rise: Why Sitting Tight Isn’t an Option for Buyers
When it comes to mortgage rates, interest rates in the UK are on the rise. And, you could miss out on a property if you just sit back and wait for rates to fall. Although rates have momentarily stuttered in the war with Iran, interest rates are still on the rise for mortgages, and you would do well to bear a few things in mind, especially if you are a first-time buyer, looking to buy a new build or looking to remortgage.
The backdrop is that, although the UK property market has, so far, absorbed a number of global shocks rather than collapsing, it is still vulnerable to inflation pressure. Rises in interest rates will further reduce buyers’ disposable income and new build stock is often even more expensive. Never has it been more important to consider budget and timing.
WHY IS IT RISING? Central banks across the world are increasing interest rates in a bid to combat inflation and turbulent economies. In the UK interest rates have also increased, impacting the number of mortgage deals on the market. This will see a number of developments having to re assess their budget and the expectations of buyers.
Well, it looks like we're about to find out. Given the circumstances, my short term forecast for the housing market would be cautious optimism. Although there should be some good deals and relatively easy picking for motivated buyers, with court proceedings for buyers and sellers that could take months to sort out and changing rules and regulations that have the potential to halt or at the very least slow the whole buying process down, this is not an environment that's particularly friendly to buying and selling real estate.
Practical Takeaways for Buyers:
It is currently a very good time to get mortgage-ready. The lenders are still open to offering very competitive interest rates but it is unlikely these deals will last long and the interest rates may rise in the coming months. So it may be a good idea to lock in the deal as early as possible.
- Consider an increased monthly repayment by exploring your debt-to-income ratio with increased interest rates.
Fixed-Rate Mortgages In a volatile interest rate market, fixed-rate mortgages allow you to lock into a stable monthly payment.
- Renters should be keeping an eye on any policy changes in relation to leasehold or evictions which could impact affordability and supply.
FINAL TAKEAWAY TO BORROW:
It’s no longer in your favour to sit on your hands waiting for mortgage rates to fall. We’ve switched from rate watch to rate racing and the slabs of cash needed for decent loan repayments have turned financial acuity into the new mortgage superpower.
