With the Bank of England voting to raise interest rates by 0.15 percentage points this month to 0.25 per cent. It is a surprising end to a remarkable year for the mortgage market.
Many economists expected a rate rise at November’s meeting, which didn’t come. So, the first rise in three years was always on the cards. While the Bank of England rarely moves rates in December, soaring inflation. Which has hit 5.1 percent, may have proved instrumental in forcing its hand.
Borrowers don’t need to panic as many are on fixed-rate mortgages so won’t see an increase in monthly payments. Those on a variable rate will see a small increase and it is worth thinking about remortgaging if you haven’t for a while. Indeed, some lenders pre-empted the prospect of an interest rate rise by introducing long fixed-rate mortgages of up to 40 years. While such a fix would provide security for borrowers worried about the prospect of future rate rises. It is important to look carefully at the early repayment charges for getting out of the mortgage early. Nobody knows for sure what is around the corner, which is why borrowers tend to opt for shorter fixes.
2021 didn’t get off to a great start – we were still in the depths of Covid with another national lockdown as schools closed and workers continued to be furloughed. And yet, against all the odds, it has been an astonishing 12 months for the housing market.
For most of this year, there has been a stamp duty holiday in place, persuading many buyers that it was a good time to make a move. It is just as well that there was a potential saving to be had as property prices continued to rise to new highs. Despite forecasts at the start of the year that prices would be flat or might see a small rise, double-digit growth has been the reality.
Fears that the Chancellor would hike capital gains tax on property to bring it into line with income tax in the Budget were unfounded, although IR35 regulation was introduced in April. A tax change moving the tax liability for contractor status from individual to the employer. This means lenders may scrutinize the contracts and income of contractors more closely than ever.
First time buyers
Certain groups have found life more difficult when it comes to getting a mortgage. Such as the self-employed, with a number of lenders imposing restrictions such as lower LTVs. Thankfully, the situation has improved as the year has gone on although self-employed borrowers in particular should seek independent mortgage advice before taking out a loan.
With the Bank of England finishing the year suggesting it may relax mortgage affordability checks introduced after the financial crisis, this could make life easier for first-time buyers. More choice at higher LTV mortgages became available as lenders returned to this market, which meant rates fell. By the end of the year, pricing on 95 per cent LTV mortgages was back to where it had been two years ago.
Anyone thinking of taking out a mortgage to buy a new property or remortgaging. Should seek advice from a whole-of-market broker such as AWS Private Finance. If you are planning on buying a home, we can give you idea to how much you could borrow. So, you don’t waste your time or anyone else’s. Agents will want to see evidence and have funds in place ready to move when you find the right property. If you are remortgaging, we can help find the right deal for your circumstances, ideally before interest rates rise. Get in touch for more information.