What will the potential rise in interest rates mean for mortgages?

Over the last few months there has plenty of frenzied speculation about exactly when interest rates will rise and by how much. Bank of England Governor Mark Carney has kept his cards close to his chest, but he has dropped a number of hints that rises are coming in 2015.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, expects the Bank of England to increase rates twice in 2015, bringing them up to 1%.

Interest rates have been fixed at historic lows of 0.5% since 2009 as part of a move to get the economy back on track after the global financial crisis hit in 2008. At the Bank of England’s August meeting, two members of the nine-strong Monetary Policy Committee (the body responsible for setting interest rates) voted to raise interest rates, the first split vote for five years. As seven members voted to keep interest rates as they were, no change was made, but it seems clear that a rise is going to be happening sooner rather than later.



But what does this mean for homeowners and the knock-on effect it will have on their mortgage repayments? An interest rise of just 1% would add £1,000 every year to the cost of a mortgage, meaning that those looking to buy or sell would be well-advised to get moving as quickly as possible to avoid the rate rise and the additional costs this would bring. Current homeowners should also reconsider their existing mortgage deal to make sure they are well protected against any interest rate rises.

Many current or potential homeowners are uncertain about how an interest rate rise may affect their ability to meet their monthly mortgage repayments. Research carried out earlier this year by Equifax suggested that 50% of people believe they would struggle from a financial viewpoint to meet an increase in their monthly mortgage repayment. Furthermore, for anyone looking to renew or take out a fixed-rate mortgage, it could be the beginning of the end for low fixed rates. With the prospect of an imminent rise, the big lenders have been gradually increasing the price of fixed rate mortgages over the course of this year. Certainly, the run of record-low mortgage rates would appear to be a thing of the past.

When it comes to choosing a mortgage with rising interest rates in mind, there are certain mortgages that can protect you more than others. If you want to have monthly repayments that are set at one price, a fixed rate mortgage gives borrowers certainty over what their mortgage repayments will be for the length of the mortgage term. In addition, if interest rates were to rise significantly your repayments would not become more expensive. The downside to this, of course, is that it works both ways, and you would not benefit should interest rates fall.

Tracker mortgages, on the other hand, track the Bank of England’s rate plus a pre-agreed mark-up. For example, your mortgage could be the base rate plus 3%. So, as things currently stand, you would be paying interest of 3.5%. Another option is a variable rate mortgage, which can provide cheaper interest rates as lenders battle to offer the best rate. Having said this, rates vary at the discretion of the lender and they can potentially raise the cost of your mortgage.

So with lots of homeowners looking to sell this January and an interest rate rise expected later in the year, not to mention the general election in May which will have an effect on people’s purchasing decisions, if you’re looking to get on the move in the property market the next few weeks is the perfect time to start looking at what houses are on the market.

At ChimneyPots we can offer a free mortgage quote from a regulated mortgage advisor. You can also calculate the mortgage you can afford with our online mortgage calculator. To see how much your property is worth, use our free instant online valuation tool. And for any additional advice on buying and selling, please contact us on: 08448 099931.

http://chimneypotsestateagent.co.uk/what-will-the-potential-rise-in-interest-rates-mean-for-mortgages/

Must know info for first-time buyers

Buying a house for the first time is one of the most important life decisions (and investments) many people will make. Given what is riding on this purchase, it is little surprise that first-time buyers can find the process thoroughly daunting.

As estate agents working across the South of England, we have taken the opportunity to provide some handy tips to buyers dipping their toe into the property market for the very first time.

Speak to a mortgage specialist
Before you even start actively looking to get on the property ladder, it’s prudent to seek advice from a specialist mortgage adviser. They will be able to give an overview of the market and match your individual needs to the correct mortgage products available, taking into consideration your income, credit history and deposit. Many advisers will also be able to provide you with a free mortgage quote.
Mortgage specialists can also make sure that you are eligible for a mortgage in the shape of an ‘agreement in principle’, which means estate agents will take you more seriously when you start viewing houses in earnest. Expert advice will also ensure you are targeting appropriately priced houses.

Do your research
As the famous saying goes, knowledge is power. And this is particularly apt advice for those looking to buy, as first-time buyers need to know as much as possible about the market and the area they are looking to live in. For example, how good are the local amenities and transport links? How safe or family-friendly is the neighbourhood? Search the internet or visit in person to get a real flavour of the local area.

Parental advice
Many first-time buyers are between the ages of 25-35. In these cases, parents who have gone through the experience of buying before can be a very good sounding board to turn to. They can offer sound advice and guidance, they’ll be more likely to tell you what they really feel, and they can point out any potential issues that you may not have taken into account. As well as this, the so-called Bank of Mum and Dad may be able to provide financial support to help you onto the property ladder.

Keep an eye on the finances
When you have bought a house, it’s not simply the mortgage repayments every month you have to worry about. You must also factor in the cost of utility bills, council tax, property upkeep and home insurance. First-time buyers, especially those who have been living at home, might be taken by surprise with these costs and need to learn how to budget effectively.

Borrowing more than you can repay is always a very bad idea, so you need to make sure your finances are in good order before you think about home ownership.

Browse around then pinpoint your favourite properties
Once you have decided on the one or two properties that appeal most, arrange a second viewing. Now is the time to ask the estate agent or owners any burning questions – e.g. the average cost of heating and telephone bills or queries about parking.

Put in an offer
When you have chosen your ideal home, the next step is to approach your estate agent, declare your interest and place an offer on the property.

Follow the legal process
If your offer is accepted and the purchase approved, you need to hire somebody to deal with all the legal elements of buying a house. This is known as conveyancing and is often done through a solicitors firm who will provide you with a conveyancing quote.

The final furlong
Even once the purchase is agreed it may be several months before you can move in as a number of issues inevitably have to be ironed out. At this time, it is important to reply to any correspondence quickly and decisively to avoid any unnecessary delays.

Further advice for first-time buyers can be found on our buyers guide. You can also contact us on 08448 099931 and search for properties for sale here.