A generation has become accustomed to the low rates that endured following the “Credit Crunch” of 2008, and the resulting cheap access to capital; but this exposed ‘UK PLC’ to economic shocks and removed a key monetary tool – tales of negative rates circulated during the Covid-19 economic contraction. It was inevitable rates would eventually rise, but the pace in which this has happened is alarming to many.
A household on a 2-year fixed mortgage – a common mortgage product – could have secured a mortgage in 2021 at under 2% and now face remortgaging on a like-for-like basis at over 6%. On a £100,000 loan over a 25-year term, this would increase monthly costs by over £220. Ouch!
At present, the longer-term fixed products (5-year and 10-year) are offering lower rates than their short-term equivalents, which is an inversion of the usual dynamic. You would expect to pay a premium for the security of a long-term fixed product, but the inflation and interest rate projections are such that lenders are keen to incentivise borrowers onto long-term products (whilst rates remain high). Lenders are profit driven and clearly feel, on the balance of probability, that borrowers on short-term deals are a greater threat to their position.
Inflation is forecast to fall towards the target 2% by early 2025, and interest rates are likely to mirror this trend. The pain is therefore likely to be short-term and tracker and variable mortgages may be attractive to those unfortunate enough to remortgage over this period. Note, switching variable products is likely to be cheaper than simply allowing your mortgage to drift onto the Standard Variable Rate (SVR). For instance, Nationwide are offering ‘switches’ at 5.29%, whereas their SVR is 7.99%.
To assist the housing market, Skipton announced the introduction of a 100% mortgage for renters in May. This offering will enable those ‘trapped’ in the rental market to purchase a property without the requirement to raise a deposit, and the cost of the rent is part of the affordability assessment – if a household can evidence £500pcm in rent, say, then they may be able to afford the same sum as a mortgage repayment. Note, Skipton have capped lending at the monthly rental sum on this product.
This first-of-a-kind mortgage is likely to offer renewed hope to those that have been demoralised by the changing market conditions, the deposit requirements (5% absolute minimum) and the tightening lending criteria. The influx of “new” customers is also likely to support house prices over the short-term; good news for those already on the ladder.
We strongly believe in the benefits of developing long-lasting relationships with our clients.
We aim to be approachable, easily contactable and offer a broad, inter-discipline, assessment of client needs. We are happy to meet via telephone or virtual meeting, but still prioritise face-to-face meetings where possible.
We work closely across our departments to ensure that specialist knowledge and experience is accessed; when queries arise, there will always be someone available who understands and can deal with your concerns.
We are also keen to work alongside other key stakeholders and individuals; land agents, accountants, your existing solicitor or financial adviser, and of course, your family.
As a firm we are keen to promote and involve ourselves in the community, and to support local charities and initiatives, such as Jeremiah’s Journey, St. Lukes, the Plymouth Argyle Community Trust (Project 35), Emotional Logic and the Ivybridge Brewery.
The South West is a beautiful places to live and we are proud to be based here, we’re therefore keen to help where we can.
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