Mortgage news

What’s going on with the mortgage market?


Rapid base rate increases have played havoc with the mortgage market. Interest rates have peaked and troughed, making it almost impossible for homebuyers and homeowners to find stability. However, as we head into the latter half of 2023, things are looking a little brighter. 

In August, the Bank of England increased the base rate again, making this the 14th successive time since December 2021. The base rate currently stands at a 15-year high of 5.25%, and experts anticipate another increase later this year. This is in an attempt at reducing inflation to the 2% target.  

These rapid increases have played havoc with the mortgage market. Interest rates have peaked and troughed, making it almost impossible for homebuyers and homeowners to find stability. However, as we head into the latter half of 2023, things are looking a little brighter. 

With inflation sitting at 6.8%, the cost of living is still expensive. However, it is considerably better than its high of 11.1% in October 2022.  

Because of this, in recent weeks, some lenders have been able to reduce their rates by up to 0.4%. They feel confident enough to lower mortgage rates despite an upcoming base rate increase later this year.  

However, the current rates we’re seeing – around 6% – is where we’re likely to stay for quite some time. The expectation is this is where mortgage rates will sit until late 2024. 

We’re seeing this consensus rippling across the mortgage market. Most first-time buyers and remortgagers are again fixing into two-year fixed deals, rather than five. There’s hope that by summer 2025, the rates should be lower than they are today.  

Is now the right time to buy a house?  

There’s always a reason not to go ahead with a purchase. Whether it’s property prices or interest rates, there’s never going to be a perfect time to buy a home.  

As rates fluctuate, many first-time buyers are approaching the market with caution. Some are choosing to delay purchasing until things feel more balanced. 

But the truth is, no one can ever be sure of what’s around the corner. Waiting for interest rates to fall may mean house prices increase, or those interest rates may become even higher. There’s no silver bullet. 

If you find a property that you love, and it is affordable, then it’s time to put an application for a mortgage in with your lender.  

I need to re-mortgage in the current mortgage market, now what? 

With the current situation expected to stay roughly the same for the next 18 months, many people (estimated 800,000) who are seeking to re-mortgage next year will be expecting to pay up to, on average, £2,900 more per year on a two-year fixed rate mortgage.

However, there are some steps that you can take to ensure you secure the best deal. 

For example, make sure you continue to hunt around for mortgage deals, even if you’ve fixed a new rate. The updated mortgage charter allows homeowners to switch to a cheaper rate with their existing lender up to two weeks before their new fixed rate begins. 

If nothing cheaper becomes available, then you’re tied into the best deal on the market. If a lower rate does become available, then you can make the switch and save money. It’s a win-win situation.  

What if I’m a landlord? 

For the 2023-24 tax year, landlords pay 20% tax on buy-to-let income when their earnings are between £12,571 and £50,270. The higher rate threshold for rental income is £50,271, this is the point at which you start paying 40% tax on your profits.  

As of 2016, all second-home owners are required to pay 3% extra in stamp duty when they buy a property. This tax and stamp duty came as part of many years of discouraging the monopolisation of property portfolios. 

Combine this with increased mortgage rates, and many landlords simply don’t know which way to turn. Most struggle with the idea of passing on these costs to tenants, but some may not be able to afford to continue letting if they don’t. It’s a catch-22. 

What to do? Speak to a mortgage advisor about your options and ensure your current set up is working for you. 

How do I cope with a mortgage increase? 

Now’s the time to be attuned to your monthly expenditure. For the short-term, cancelling any ‘luxury’ spend may be needed to make sure there’s a little more disposable income available. Many of us have TV subscriptions, for example – these might be the first to be reviewed.  

Additionally, don’t be afraid to ask for help. As part of the updated mortgage charter, those homeowners who have kept up with repayments won’t need to go through an affordability check when they come to remortgage. Because of this, it’s more important than ever to recognise if there might be a problem and seek support before you end up missing payments. 

Even if you miss a phone payment, it may work against you when it comes to re-mortgaging. Remember, speaking to an adviser or a lender to discuss repayment options, such as switching to an interest-only repayment structure for a few months, won’t affect your credit score. 

Expert advice is crucial now. While the mortgage market is heading towards more stability, we recognise this doesn’t mean it’s plain sailing for homeowners and homebuyers. Talk to our team today for fuss-free, fee-free mortgage advice; our experts are here to help you navigate the ongoing changes.