Throughout 2022 there has been a lot of talk about mortgage interest rates rising. So with that in mind, Sam and Nick from DWG mortgages visited Foundation Estate Agents to talk about what is really happening in the world of UK mortgages.
Over the last few years we’ve been spoiled with interest rates as low as 1 – 2%. Rates are now rising and by the end of 2023, or 2024 we expect mortgage rates to settle at around 5%
Over the last few years we’ve been spoiled with interest rates as low as 1 – 2%. This was never going to continue. Now, towards the end of 2022 interest rates are a lot higher. We believe that probably around 5% will be the new norm for fixed rate mortgages.
No one knows for sure just how long interest rates will continue to increase. Currently we are advising people to look for a two year fixed rate mortgage if they can. We think this would be wise because perhaps by the end of 2023, or 2024 rates will start to come down again. We expect them to end up around 5% but certainly it seems like a two-year fix would be good way forward at the moment.
Is it true that mortgage offers have been cancelled?
Following the chancellor’s mini budget in September 2022, there was lot of news coverage of mortgage offers being withdrawn by providers. This has led to home movers becoming worried about property chains, or that their mortgage offer is going to be taken away.
In fact, no lenders have cancelled their mortgage offers. So if you have been offered a mortgage, the interest rate will still apply. As long as that mortgage goes through to completion that mortgage offer will be safe.
I’ve had a mortgage approved – can the bank change my interest rate?
It’s very normal for mortgage lenders to change their rates. This happens all the time. However, once your mortgage application is accepted, the mortgage product that you’ve chosen is secure. The interest rate that you have signed up for – be it fixed or variable rate – is locked in as soon as your application is accepted.
There are still a wide range of Residential Mortgages available to choose from. Our advice is not to panic as there are many products to suit all types of customer. It would be wrong to automatically think this isn’t the right time to buy, and in fact there are many good reasons to continue with a house purchase at this time.
While we need to be prepared for higher interest rates, and we expect these to go up a little bit, before coming down again. We expect interest rates to level off at a point where it is comfortable, which is likely to be around the 4.5% – 5% marks.
There’s still plenty of choice out there so don’t worry, and don’t panic. There’s a lot of demand for property. People are still buying and people are still selling. Lenders are still very motivated to lend. They have the funds and they want to lend.
Being a whole of Market mortgage broker means that here at DWG we have access to pretty much all lenders out there. This means we have access to a wide range of mortgage products. Whether you are a first-time buyer, a home mover or maybe someone who’s had problems in the past. There are mortgages out there for everyone.
So in a nutshell, interest rates are going to be high. That is the new ‘normal’. However, this shouldn’t stop people from moving forwards. Don’t panic. It’s not true that mortgage offers have been withdrawn, or that chains have been broken for that reason.
To put this into context, I remember when I bought my first house and interest rates were about 7% – 8%, and that was normal at the time. I didn’t think anything of it. During the 1990s, mortgage rates had even been up as high as 14%.
Over the last few decades we’ve become used to these artificially low interest rates of around 1 or 2%. Going forward, we’ll just have to get used to the new normal interest rate which is likely to settle at around 5%. However, people still need to move, so people will still need mortgages.
Watch the full video below: