Written by: Brian Murphy, Head of Lending at Mortgage Advice Bureau
1. Should I wait to buy a home?
“Expectations are that property prices are at their peak, and it is feasible that they will ease from their current levels. However, if you’re renting and thinking about buying now, you’re inhibiting your ability to save anything further anyway by effectively paying someone else’s mortgage. If the house/area that you aspire to live in is affordable, if you are eligible for a mortgage and you can borrow what you need to, it should be about buying a home because it’s a home.
“Even in the event of your purchasing a property and it falls in value a little, if you look back over house prices indices over the last 15/20/30 years, invariably the value and price of housing rises. Although you might be faced with a short-term dipping of value, you will still likely come out as a winner in the longer term.
“The way that house prices ease and fall back a little is down to a whole raft of different factors, such as the level of property supply and demand and the wider state of the economy (which even in these troubled times is currently experiencing high rates of employment and low levels of unemployment). Interest rates, although higher than they were or have been, are also still reasonable in comparison with long-term averages. Therefore, it should be about looking at whether what you want to achieve is affordable, both in terms of what you feel comfortable paying, and what lenders will allow you to borrow.
“Essentially, every person’s circumstances are different, and there is no definitive approach or answer to this. It’s about what’s right for you, what is affordable, and whether you feel the price you’re paying represents good value, both now and in the future.”
2. Will rising inflation affect house prices?
“In short, probably not, because although we are obviously in an inflationary consumer and retail price environment, this is not necessarily intrinsically linked to house price inflation. For the last 10 years, we’ve had very benign retail/consumer price inflation, and in the last two to three years, we’ve seen fairly significant house price inflation.
“Because of rising household consumer price inflation and the impact that is having on disposable incomes, this in itself is starting to weigh on the ability for house prices to rise much further, if at all due to increases in debt servicing costs, borrowers ability to raise the level of borrowing needed and affordability. Therefore, we are anticipating some plateauing or easing back of house prices, which is partially an effect of the near 40-year high CPI/RPI inflation that the country is experiencing.”
3. How can I secure a mortgage at a good rate?
Don’t just go and visit your bank or building society, with whom you perhaps already have a financial relationship. Engage a whole of market mortgage broker, as they will have access to all mortgage products in the market, including from lenders who don’t deal directly with consumers, in addition, a broker is acting on your (the borrowers) behalf rather than on behalf of the lender.
“What we have seen in recent weeks and months is a significant price differential that currently exists between where the entry level for fixed rate mortgages currently sits versus the entry point of tracker and discounted variable rates. This is offering some borrowers many of whom previously wouldn’t have thought about a variable rate before the recent hike in fixed mortgage rates, access to a new product range, which for some is proving to be financially beneficial at the moment.
“With this in mind, don’t just go into the process thinking you want a fixed rate mortgage. There are other options, including discounted variable rates, and base rate trackers which for some people may be a better solution than perhaps just going for the arbitrary fixed rate term.
4. Should I re-mortgage my home to try and get a better deal?
There may be a variety of reasons for remortgaging, but for most, coming to the end of their current fixed rate deal and wanting to replace it with a similar or better rate is the primary reason. With the recent rapid rise in mortgage pricing to 4%-5%% & even 6% typically, most existing borrowers are almost certainly not going to be able to achieve anything like the same interest low rates they have enjoyed in recent years of c1-2% or 3%.
Unfortunately, almost everyone will be experiencing a rate increase when remortgaging, even though it might be less for some and more for others. Therefore, the chances of being able to secure a more competitive product than you are currently on is currently unlikely.
For many borrowers, they may be better off staying with their current provider and undertaking a “product transfer”, which is where you keep your mortgage with your current provider, but you switch onto a new product, be that another two, three or five year-fixed rates, or possibly a variable rate. This shouldn’t involve the same level of fees that a like-for-like remortgage may well do in the current marketplace.
As always, it’s important to note that every individual’s circumstances will be unique and will require a detailed conversation and cost-benefit analysis to identify which option is right for them.