October 7, 2024
The Bank of England announcement on 19 September, holding interest rates at 5%, came as little surprise after the base rate was cut from 5.25% to 5% in August.
Predictions are that the rate will fall further in the next few months, as long as inflation stays low. The current annual inflation rate, as measured by the Consumer Prices Index (CPI) is 2.2% against a target of 2%.
If you’ve delayed moving house, or borrowing to make home improvements, the improved outlook may mean that you’re starting to make plans again.
Talis IFA mortgage adviser, Sarah Coughlan, says;
“Two years ago, you could get a rate between 1-2%, then this rose sharply to around 5%. Even though I’m a mortgage specialist, with access to the whole market, my own mortgage increased significantly. So I understand my clients’ concerns from personal experience.”
If you’ve had a 5-year fixed-rate mortgage, you’ve probably been able to ride out the last couple of years of high interest rates without worrying unduly. But now, with the end of your fixed term in sight, it’s time to talk to your IFA about locking in a new rate.
What to do now
If your fixed rate mortgage is coming to an end in the next six months, or if you are considering moving, our suggestion would be to start shopping around now.
As Sarah explains, “Securing a rate now doesn’t necessarily lock you in to that rate if things improve before you complete. You can secure a rate if there is something competitive but still have the opportunity to shop around again if the rates then drop. As long as you haven’t completed on that mortgage you can still go to something else – whether with that lender or another.
“It’s also worth exploring the possibility of a rate switch with your current lender. Usually this would be on the same terms as your current loan, but since you’re already a customer you could be able to switch to a better rate without having to jump through all the hoops and provide all the paperwork associated with a new loan.
“Even if you’re a first-time buyer, it’s worth applying early and securing a mortgage offer. Then if rates fall (within the term of your offer) you can change rates with the lender later. Mortgage offers are subject to conditions, and there’s usually an expiry date on your offer, after which you’ll have to re-apply, but working with an IFA can ensure that you don’t get caught out by the small print.”
How to get ready for a mortgage application
Sarah has helped hundreds of clients to secure mortgages, and she knows how daunting it can be to make an application.
She also understands how frustrating it can be when you’re turned down, or ultimately get an offer which doesn’t meet your needs.
As a qualified mortgage adviser, she can help by researching the whole UK mortgage market to find the deal that best suits your requirements, and by handling the application on your behalf, minimising the risk of errors or omissions in your paperwork.
But she also has some general tips to follow when preparing to make an application – steps to take to put yourself in the best possible position to be accepted for your chosen mortgage.
“The first thing to do,” says Sarah, “is to check and document your finances. It pays to have as little unsecured borrowing (credit cards, short-term finance etc) as possible, as unsecured debt can have a big effect on how much you can borrow on a mortgage. Mortgages are assessed on affordability, not only on multiples of your income, so a lender will want a clear picture not only of your income, but also all your regular outgoings. So unsecured debt reduces what you can borrow.
“The next step is to start gathering your documentation. Lenders usually want to see your last three months’ payslips and your bank statements, as they want to see your salary credits.
“Also consider carefully how much deposit you can afford to put down, as this can affect the amount of paperwork a lender wants to see. If you’re looking to borrow on a 90% loan to value ratio, for example, a lender is likely to want to see more paperwork.
If you’re making an application via mortgage adviser, there’s a great deal of onus on them to ensure they have done their due diligence. Sarah adds, “Because I know the lender is relying on me to do due diligence, I might actually ask for more paperwork than the lender does. I’m here to help you get the loan you want, but it’s also my job to ensure that you don’t borrow more than you can currently afford to pay.”
The benefits of working with a mortgage adviser
Sarah has over 20 years of experience helping clients secure mortgages, enabling her to help people through every step of the process, especially where the circumstances make the application less straightforward. Having her expert eye on your application means that she can spot errors or omissions, and she can even support you by dealing with estate agents or solicitors on your behalf.
As she says, “we all know that moving house is one of life’s most stressful experiences. I aim to reduce that stress by being on your side through the process.”
At Talis IFA, all our mortgage advisers and financial advisers are fully independent, which means that by working with us, you have access to the full UK market.
If moving house or remortgaging are part of your plans over the next few months, and you’d like the support and reassurance of a qualified, experienced mortgage or financial adviser, talk to a Talis IFA.
We take ‘life first, money second’ approach to financial planning. It begins with understanding how you want to live your life, followed by helping you to assess your current financial position, and researching the whole market to recommend the options appropriate to you. We’ll then guide you through the process to help everything go smoothly.
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