With mortgage rates continuing to rise, it is no surprise that brokers and lenders are busy trying to process applications. Borrowers, keen to secure a decent fixed-rate mortgage before rates rise higher, are finding that many lenders are dealing with high volumes of business, which is slowing down the process. Indeed, Santander has said it will grant temporary one-month mortgage offer extensions in an attempt to deal with the backlog.
With property prices also continuing to rise the average price of a home in London is now £529,829 according to the Office for National Statistics those looking to buy may well need to maximize their borrowing power as much as possible. Rising mortgage rate will not help from an affordability perspective.
Borrowers are right to consider securing a fixed rate sooner rather than later with average mortgage rate jumping by 0.5 percentage points in a month, according to Moneyfacts, with five-year fixed deals now an average of 3.89 per cent. This is a 0.52 percentage point increase since June and the highest since November 2014.
It is more important than ever that borrowers keep an eye on their mortgage rate and plan well in advance. Even if you don’t need a new mortgage immediately. It is possible to book a new deal up to six months before you need it, depending on the lender.
Day-rate contractor mortgages
Day-rate contractors on fixed or short-term contracts who are paid a daily rate, often working in IT, finance and construction. They can find more difficult to get a mortgage as not all lenders will take their contract income into account. Many high-street lenders don’t really understand contractor mortgages, with many assessing contractors as self-employed applicants, basing income on salary and dividends rather than the day-rate model. This means many borrowers end up with a smaller mortgage than they would otherwise.
However, some lenders offer preferential terms for contractors, taking your day rate into account, rather than an average figure. These lenders will look at the type of contractor you are, how long you have been contracting for, and how long left on your contract. The longer you have been contracting and the stronger your track record, the better. Some lenders offer professional contractor mortgages so if you work in IT, accountancy or as a solicitor, there may be increased choice available to you at more competitive rates. With rates continuing to rise, this is more important than ever.
Some lenders offer professional mortgages to applicants because they understand how the income of doctors, lawyers and accountants etc. is structured, and appreciate your future income potential. Some professions can access higher income multiples of up to six times income, as opposed to the standard four or 4.5 times for non-professionals. While some lenders will take 100 per cent of variable income into account when working out how much you can borrow.
Get in touch
With property prices and mortgage rates continuing to rise, independent advice you can trust is more important than ever. A whole-of-market broker such as AWS Private Finance is the best place to start; We look at all the deals on the market to find the right one for your particular circumstances.
AWS have plenty of experience in arranging contractor mortgages and professional mortgages, knowing which lenders offer the most favorable terms. We know which lenders have service issues and which ones to go to if you need to get a mortgage. Particularly if you are competing to buy property and need to move fast. Get in touch for more information.