Rising Interest Rates: The Key Questions Answered
On Tuesday night 935 mortgage products were taken off the market. This was the biggest reduction since records began, almost double the prior record and represented a 26% reduction in mortgage products offered. Whilst 2,661 mortgage products are still available, half of all mortgage products have been taken off the market since December when interest rates began to rise. The recent fall in the pound has led many forecasters to predict interest rates will rise, from the current 2.25%, to 6% next year.
What will happen to my mortgage?
Rising interest rates effect different mortgages differently. About 80% of borrowers are on fixed rate mortgages. These usually last for 3-5 years. If your mortgage is on a fixed rate you are insulated from any rises for now. However, when your fixed rate expires, your mortgage will move onto a variable rate at present the average lenders standard variable rate (SVR) sits at at around 5.5%. About 1 in 5 borrowers are on a variable rate either linked to the Bank’s base rate or the lenders SVR. If you are on a variable rate then rising interest rates will cause your monthly interest payments to increase. Given this if you are on a variable rate or if you have 6 months left to run on a fixed rate, now would be a good time to start looking for a new rate as many predict interest rates are only going to rise further.
Will the government help people with their mortgages?
It is unlikely the government will directly help people with their mortgages. The size of most mortgages means that the cost to the government of providing mortgagees with support would be astronomical. That said the government and the bank of England will try and stabilise the market and reassure lenders. As well as this targeted measures like the recent reduction of stamp duty are also partially designed to help purchasers by leaving them more money in their pockets to make mortgage repayments.
Can my mortgage offer be withdrawn?
If you have agreed a mortgage offer then it should and will be honoured by lenders. However, if you are looking to get a mortgage presently, unfortunately you will be affected. Many mortgage products and rates have been withdrawn from the market and their replacements will be more expensive. It is only once a mortgage application is complete that the rate is secured.
If I want to buy a new home is now the time to buy?
Ultimately it is impossible to make absolute predictions on what will happen with.both the property and mortgage market and as such you have to do what you think is right. That said interest rate are likely to increase, so if you are looking to purchase home in the next 12 month you are unlikely to get better rates than now. That said the rise in interest rates combined with a likely recession means that the housing market is likely to fall particularly if mortgages become unaffordable forcing homeowners to sell up. Some experts have predicted that average property property prices will fall by as much as 10% next year. Which means when it comes to when to buy you have to judge the benefits of better mortgage deals now and better property deals in 6 - 12 months.
Is now a bad time to sell my home?
Not necessarily. With interest rates rising many predict property prices will fall. That could make now the optimum time to sell your home. After all average property prices in the UK reached a record level in July of this year so prices remain high for now. But as mortgages become more difficult to get and less affordable demand is likely to decrease and prices with it. As well as this if you are worried about rising rates affecting your ability to make mortgage payments or if your mortgage is expiring, now may be a good time to sell up and purchase a new home with a fixed rate mortgage before they rise further.
If you are interested in selling your home fast, give Gaffsy a call for a free no obligation cash offer on 0208 459 4546.
Will more houses be repossessed?
As mortgage rates rise it is possible more people will be unable to repay their mortgages and as such repossession numbers will increase. None the less repossession is a long legal process and lenders should first try to organise a repayment plan.