Listening to our experts: Their take on mortgages and the current climate
A mortgage is likely to be one of the biggest financial commitments you’ll make, and we understand the process can be complex, daunting, and overwhelming. Specialist advice from an experienced mortgage advisor is invaluable as they will unpick your personal circumstances and use their expertise to find a product that is tailored to you – making the process quick, and stress-free.
To help you on your home-buying journey, we interviewed our very own panel of experts to ask the questions we know you would like the answers to.
High interest rates
The increases to mortgage interest rates have been the topic of conversation as of late and may be an added worry to our customers.
We asked the experts, ‘Should I be worried about interest rates being higher than they were?’
All panellists expressed their understanding as to why people may be concerned about increases to interest rates. The expert at FirstXtra acknowledged that interest rates were at a historic low but that they “have gone up in the last few months and lenders have put their interest rates up to reflect that.” When asked if customers should be worried, the expert explained, “While interest rates were high a few months ago, they have come down slightly and it is still all affordable with lenders so you shouldn’t be worried.”
Mortgage application rejection
When you embark on your journey of applying for a mortgage, the idea that your application may be rejected is not something typically considered.
We asked the panellists, ‘Do I have any options if my mortgage application is rejected?’
FirstXtra explained, “If your application is rejected, we will look to appeal this with the lender. We will also look at alternative lenders if the appeal is not possible due to affordability or undisclosed credit, as we have specialist alternative lenders that may be able to assist.”
While experts at TMP stated a mortgage rejection was rare as they, “Spend a lot of time and use our experience to ensure that the lender recommended is the best fit according to the applicant’s circumstances.”
Expiring mortgage offer
When buying a new build, it is particularly important to bear in mind that mortgage offers are not open-ended therefore it is pertinent to keep on top of the process. Most mortgage offers are valid for 6 months, but some can expire in 3 months.
Our next question was, ‘What can I do if my mortgage offer expires before I’m able to move in?’
Metro responded, stating, “Most lenders will allow you to extend the offer or give you a ‘grace period’ on the existing offer.”
A panellist from Mortgage Decisions expanded, explaining, “Depending on the lender, most will look to give offer extensions of up to 6 months and some will extend even longer.” However, it’s important to note that lenders are not obligated to do this and in doing so is “on a case-by-case basis”. Mortgage Decisions also explained that an extension “is often controlled by whether the property is fully built and also on the basis that the client’s circumstances have not changed.”
Support for struggling to make repayments
If your financial circumstances change and you find you’re now struggling, you may be wondering what your options are.
We asked the panellists, ‘What support can I get if I’m struggling with my mortgage payments? What if I can’t afford the interest rate when my mortgage is up for renewal?’
All experts on the panel agreed that if you are experiencing difficulties with repayments, there is help and support available.
Heritage said that if a customer was unable to afford their repayments, you should “contact your broker to see if there is anything that can be done to reduce the payments or extend the term.” If this doesn’t provide any options, “your broker will get you to contact the lender as you may be able to make an arrangement to pay less for a period of time or perhaps take a payment holiday. Please note that this can have an adverse impact on your credit rating.”
Differences between rates
Understanding the differences between rates is integral: it will help to inform your decision about which mortgage deal to apply for.
The next question we posed to the experts was, ‘What’s the difference between a variable rate and a fixed rate?’
A panellist at Mortgage Decisions provided a detailed explanation between the differences of each rate.
When asked about a fixed rate, they explained, “A fixed rate sets the monthly payments. By fixing the interest rate for a period of time known as the incentive period of at least 2 years. Traditionally 5 years is used to gain affordability as lenders are more comfortable with a longer term of knowing what you are paying. As it states your payments will not change during this period. These interest rates at the moment will come at a higher premium.”
Then they went onto state that, “A variable rates can change month to month. There are 2 types which are a discount variable which is set by the mortgage lender based on their standard variable rate and will change when they change their standard variable rate. The other type of variable is a base rate tracker which is the same concept as a discount variable but tracks the Bank of England base rate and will change when the Bank of England changes their interest rate.”
When applying for a mortgage, there may be other fees attached to your application that you need to be aware of.
We asked the panellists, ‘What other fees may be attached to my mortgage application?’
Every panellist agreed that there are generally other fees to consider when applying for your mortgage. Breaking these fees down, Heritage explained that there are several different fees charged by lenders and which are the most common.
“A product fee is a fixed amount of a percentage of the loan amount, generally around £1,000. These fees are charged so the lender can provider a lower interest rate. There is a valuation fee, paid for by the applicant for the lender to carry out a basic survey for mortgage purposes. A deeds release fee or mortgage exit fee is a fee charged when you pay the mortgage back, either by re-mortgaging to another company or making your last payment. Finally, there is an early repayment charge, a fee charged if you pay off your mortgage within a certain period of time (normally the fixed rate period). This fee is a percentage of the amount repaid.”
We hope you’ve found our mortgage panel series and the insights provided by the experts useful.
We’re here throughout your home buying journey, so if you have any questions at all, please contact your experienced Sales Consultant to discuss any concerns or queries you may have.