"The first rate cut has meant mortgage rates have begun to come down, and there is indeed hope that they will come down further."
- Danny Belton - Mortgage Advice Bureau
After two years of rate increases, the Bank of England finally decided it was time to cut rates. This has sparked numerous re-prices, with some mortgages now being under the 4% mark.
This has been a long time in the works, but finally, the Bank of England has cut interest rates, sparking optimism in the market and hopes of a strong end for the summer and autumn ahead. Those who’ve gotten mortgage-ready over the past year will be in pole position to take advantage of the first rate cut. However, for those who haven’t, this is what they should be considering now.
Buy when you are ready
Buying a house isn’t just an investment. It’s somewhere you will live and call home, and this means other factors should be considered - not just monetary values. The first rate cut has meant mortgage rates have begun to come down, and there is indeed hope that they will come down further.
Trying to time the market is impossible, and simply put, if you’re ready to get started on your mortgage journey, you should do so when it’s right for you. There might be future rate cuts, but mortgages are based on the future of interest rates, and lenders will have priced these in already.
Inaction could cost you £24,000
For those who are due to be remortgaging soon, it’s likely you will still face an increase in borrowing costs. If you’re worried about being able to afford the repayments or are nervous over what the increase might be, speaking to a broker or your lender should be the first step. Don’t bury your head in the sand - it won’t help.
With most buyers having a 30-year mortgage term, it is also important to note that rates will go up and down over that time. So, it’s important to get the right advice to ensure it is affordable today and throughout the mortgage term.
What is vital is not to sit on the SVR. In most cases, this will be much more expensive than a new fixed mortgage or other alternative. In some instances, it could cost you £24,000 more over the same amount of time as a fix.
It’s all in the deposit
For first-time buyers, the deposit is often the hardest thing to save for. However, making full use of help to buy or lifetime ISAs is a great way to boost this. Mortgage lenders typically have increments of 5% in terms of the loan to value and associated interest rate.
For a first-time buyer, often even just a few thousand more could push you into a lower LTV band and a cheaper deal. For example, a first-time buyer saving £15,000 more for a deposit and moving to a 90% LTV instead of 95% LTV could save over £50,0001 over the lifetime of the mortgage, assuming interest rates stayed the same.
Making use of the free £1,000 per year of the LISA could be crucial, and remember if there are two of you buying, you can both get £1,000 a year for free.
