Its Beginning to feel a lot like Xmas!

Anti inflation measure versus mortgage rates.

The Bank of England has announced an increase of 0.25% to its Base Rate this month. This is its 11th consecutive rise, pushing interest rates to 4.25%, the highest they’ve been for 14 years. The move is designed to curtail inflation which has impacted everyone. By coincidence, Nationwide announced a reduction in the interest rates on several of their mortgage products on the same day. Then, on 15 March, Chancellor Jeremy Hunt presented his Spring Budget and said that he expected inflation to fall back to 2.9% by the end of the year. The markets received this as a positive sign and indicated that interest rates had either peaked already or were about to peak.  Prestwick Market Update The uncertainty regarding mortgage rates has had little effect on the Prestwick housing market which has been very busy in March. Despite predictions of a housing collapse being on the horizon, nearly all recently listed properties have been sold in a rapid manner with many of them achieving more than the Home Report valuation. As we expected, increased costs across the board have helped to limit the offers over the HR valuations in a lot of cases compared to the giddy heights of last spring. However, the impact has not been as expected and many properties, depending on their competitiveness and location are still seeing substantial premiums over HR. First Time Buyers are beginning to see some encouragement in eyeing entry-level properties where they can get involved and where the premium is not as marked as the prestigious bungalow market. That includes Flats where the market is also strong, especially two bedrooms on the ground floor. In short, the market is lively at present, and while some of the press are determined to make you feel that the crash is just around the corner, the levels of activity at present are healthy and government predictions for the economy at large bode well for a stable housing market. If you would like to read what Rightmove think about the impact on mortgage rates, click here

Mortgage Market Information

While plenty of experts predict a downturn in the property market in the coming year, predictions regarding how badly prices will be affected vary from “ A Slight Market Adjustment”, to “Disaster for Scotland” depending on their take. What should dampen the blow to the prices from the last major “Crash” in 2008 onward is the liquidity of the banks. They could not lend to would-be buyers from 2008-2012, so the lack of available mortgages helped drive down the demand for house purchases. The banks are in a much better position now, although the interest rates have risen recently.  I asked our preferred mortgage adviser, Angela, of Fisk Mortgage Services to give us some insight into the current mortgage market. Angela writes,- Unsettled mortgage market – confusing! Due to the quick succession of Bank of England rate increases, it’s no wonder that most people are concerned about either their current mortgage payments or new mortgage payments if they are planning to move home. Even those who didn’t pay too much attention to mortgage interest rates are really starting to sit up & take notice, which in my opinion is no bad thing. The good news, if there is any,  is that mortgage interest rates have come down slowly over the last couple of months in particular 5 years fixed rate deals allowing cautious borrowers to lock in the rate for long periods as well as giving the lenders more stability in their lending books.  However, it is an ever-changing market which means that lenders are constantly repricing their mortgage deals offered to reflect these changing conditions. There are many factors which are reflected in the mortgage rates so getting into the details of what’s likely to happen is a tricky road to try to travel on, although it doesn’t stop many of our so-called “experts” trying to do exactly that. All that we can ever do when thinking of arranging a new mortgage whether we’re buying a new home or our first home, restructuring our current mortgage where borrowing additional funds or not, is that you consider our circumstances at the time & make our decision based on this.  Here are some things to consider: Do you need the peace of mind of knowing how much you will pay for a certain time by fixing the rate? How long would you like your payment fixed for i.e. are you planning any future changes which could affect this decision such as moving home or paying off the mortgage? What if rates were to increase in the future – you need to consider the “what if’s” & prepare for increased payments so that you don’t leave yourself overstretched financially in the future. What happens if things go wrong – how can you protect your payments ensuring you don’t lose your home? As long as we understand that things can & do change in this unpredictable “world of mortgages” and by arming ourselves with as much information that is available to us at the time of making the decision then I don’t believe we should allow this uncertainty to stop us from making the decision to move home or borrow more money to fund building that extension etc otherwise how do we progress…..? I would just like to thank her for her thoughts. In a recent conversation with Angela, my main takeaway was- not to place all your faith in the interest rate alone but to take the whole mortgage package including all the fees into account as well as the projected affordability. I am reminded as well that the interest rate when I bought my first home in the 1990s was 9 per cent. If you would like to know more about mortgages, then contact us and we will pass your questions on to Angela.