When considering your next mortgage product, it is key to understand how long you may be committing yourself for. Over the last decade we have seen a very competitive mortgage market with ultra-low interest rates which some may have been accustomed to. Unfortunately, due to a challenging 2022, these days seem a distant memory. So, what should you be considering?
The lowest rates on the market currently are being offered on variable products – both discounted variable’s and Bank of England tracker’s. Whilst some lenders offer flexibility of leaving early with their variable product options, some do not. Many variable products also have early repayment charges (ERC) linked to them for not honouring the full entirety of the introductory period, exhibiting similarities to a fixed rate.
This leads nicely onto current fixed rate pricing. Typically, the shorter-term fixed rate products offered the lower interest rates. This is no longer the case. Due to uncertainty surrounding the UK economy, inflation peaked at 11.1% in October 2022, and global external factors, interest rates have risen, and lenders are finding pricing their 2-year offerings challenging. With the long-term future appearing brighter, and interest rates within the wholesale market reducing (swap rates), lenders are more comfortable offering lower interest rates for longer term products.
Many fixed rate products have ERC’s that apply throughout the fixed rate period. Some may reduce throughout the fixed period, and some may stay at a flat percentage throughout the full fixed term. With the lower rates being offered on 5–10-year fixed options, it is vital you consider the charges that apply should you ever need to leave that lender. ERC’s will be displayed within a mortgage illustration. Whilst many lenders will consider an application to port the mortgage product to a new property, personal circumstances and criteria changes may impact the application, meaning that leaving is the only option.
Adam Connely from Connely Roberts commented: “It is more important than ever to speak with a professional who will provide expert advice and help find you the best mortgage product tailored to your circumstances and aspirations. A good broker will provide a holistic approach to mortgage advice and educate their clients about the pros and cons of various options.”
*Your home may be repossessed if you do not keep up the repayments on your mortgage*
12 Jul 2022
7 Nov 2022