Whether you are a homeowner or a homebuyer, what are your mortgage options? Last year interest rates sat at a historic low. However, the Bank of England (BOE) made the decision to start increasing interest rates – and rates are expected to keep rising. What does that mean for mortgages and what are your mortgage options?
A Snapshot of the Current Climate
The Nationwide House Price Index recently revealed that annual house price growth has slowed to 4.4% in November, from 7.2% in October 2022.
“Over 80% of our tracker mortgage submissions in 2022 were from October onwards. The September mini-budget spiked fixed rates to roughly 6.5% for common fixed mortgage products. This made trackers more viable and cost-effective. Despite the recent BoE rate rise to 3.5% yesterday, this is still the case.However, as fixed rates continue to decrease and with the BoE predicted to continue to increase the base rate in 2023, we may see a swing in favour back to fixed mortgage products.
Sam Amidi, Head of Mortgages at Move iQ’s recommended online mortgage broker, Better.
How much could you borrow?
Whether you are borrowing for a new mortgage or remortgaging on our existing property, seeking advice from a mortgage adviser is always recommended.
They will look across multiple lending options and find the right deal based on your circumstances.
Interest rates are frequently changing, an adviser will be aware of what’s available and when deals will end. It’s worth tapping into this knowledge and foresight!
Our recommended mortgage advisers are online with a team of experienced advisers – they offer fee-free advice for most customers and have access to over 12,000 deals from 90 lenders!
Your home may be repossessed if you do not keep up repayments on your mortgage.
Homebuyer mortgage options
There’s been some good news recently for hopeful homeowners.
Green deals
Going green could help you save.
If it’s a cheap deal you’re looking to secure, a ‘green’ mortgage could be your answer.
Green mortgages can offer lower mortgage rates, cashback when you take out the mortgage, or additional borrowing at lower rates. NatWest, Halifax and Barclays offer green mortgages, with NatWest offering a reduced rate on a two-year or a five-year fixed-rate mortgage, along with cashback.
More fixed-rate options
In the outbreak of coronavirus, mortgage deals on the market halved. However, more options for some 10-year fixed-rate mortgages have some to the market, which might suit you if:
- you’re looking for a low-cost option
- looking for long-term security
- you aren’t planning to move in the next 10 years
Of course, this isn’t for everyone. There are potential issues, including a lack of flexibility and ERCs (early repayment charges)
A mortgage adviser will be able to help you decide which is the right option for you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Shared-ownership mortgages
First-time buyers with lower deposits (less than 10%) are the ones who will feel the biggest impact of any house price growth
However, shared ownership could be the answer you’re looking for.
Shared ownership mortgages have a number of benefits, including bringing down the size of the deposit a buyer needs (5%) and helping more people to get on the property ladder.
Further help for first-time buyers
From April 2021, the Help to Buy scheme was limited to first-time buyers alone, rather than all buyers. Regional price caps will also be introduced; up to £600,000 in London.
At the time of publication the regional price caps are as follows:
- North East: £186,100
- North West: £224,400
- Yorkshire and the Humber: £228,100
- East Midlands: £261,900
- West Midlands: £255,600
- East of England: £407,400
- London: £600,000
- South East: £437,600
- South West: £349,000
- North East: £186,100
- North West: £224,400
- Yorkshire and the Humber: £228,100
- East Midlands: £261,900
- West Midlands: £255,600
- East of England: £407,400
- London: £600,000
- South East: £437,600
- South West: £349,000
Homeowner mortgage options
If you’re a homeowner and feeling anxious about your finances, our mortgage advisers have put together some mortgage options top tips for you:
You can usually remortgage a full six months before your deal finishes
The advice is to take advantage of the current deals sooner rather than later. Previous research found that people can save an average of £3,500 a year by remortgaging.
Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
A 5-year fix could be a very good option in the current climate
With interest rate rises and high inflation, a steady, unchanging monthly payment can ease the worry for many. There are some great 5 year deals on the market, especially with a slightly higher LTV, so committing to a little extra monthly payment now could in turn be a great relief should rates and the price of living continue to rise.
Do you qualify for a green mortgage?
A green mortgage rewards you for having an energy-efficient home by offering you more favourable rates. Check the status of your property, if it’s an A or B EPC rating, savings could be made.
Investigate part and part mortgages
They are not suitable for everyone, and lenders will want evidence that you can still comfortably keep up with your monthly payments, part and part mortgages are offered by some lenders and can be an effective way of reducing your monthly payments. It’s where some of the loans is repayment and some interest only. Good brokers can fit these products to suit your needs and then make sure you have an overpayment clause to allow you to take advantage and pay off more when that extra income comes in.
Can you overpay your repayments?
While rates are low, now could be a good time to start paying that bit extra every month, or as a one-off, if you can. Check your criteria as most mortgages allow you to overpay by up to 10% per year and you might be surprised at the amount that can be saved
Consider an offset mortgage
This links your savings account to your mortgage and means lenders will treat any savings you have like mortgage overpayments. You can still access these savings, but this will affect the interest you pay. You will also need to have your savings and mortgage with the same provider.
A 5-year fix could be a very good option in the current climate
With interest rate rises and high inflation, a steady, unchanging monthly payment can ease the worry for many. There are some great 5 year deals on the market, especially with a slightly higher LTV, so committing to a little extra monthly payment now could in turn be a great relief should rates and the price of living continue to rise.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Find the right deal for you
So, while things can feel tough there are options. We can help you explore them.
Our recommended mortgage advisers are online with a team of experienced advisers!
Your home may be repossessed if you do not keep up repayments on your mortgage.
Last Updated: January 3rd, 2024
