While mortgage rates began to stabilise at the end of 2022 after a period of volatility unprecedented in recent years, the landscape for those looking to take out a home loan remains far more complex than it has for some time.

The Bank of England raised the base rate to 3.5 per cent in December, bringing borrowing costs to their highest since 2008. So, whether you need to finance a new home purchase, you are preparing to re-mortgage when a current deal comes to an end, or you’re a first-time buyer taking that first step on the ladder - you are likely to have to pay a considerably higher rate than this time last year, and with fewer mortgage products at your disposal.

But there is no need to panic. By planning ahead and harnessing expert advice, it’s still possible to find a deal that works for you.

The sooner you look into your options the better prepared you will be. Seeking advice from a mortgage broker with access to all the mortgages on the market should be the first port of call for bamboozled borrowers who might be feeling out of their depth. They will scour the market on your behalf, finding the best deal for your circumstances.

Mortgage rates can be booked up to six months before you need one so you can reserve a deal now and if – when the time comes to take it out – rates are lower, you are under no obligation to stick with the secured deal.

If you are planning a house move in the near future, having a mortgage deal already in place is essential to being taken seriously as a buyer.

You should get a decision in principle from a lender before you start your property search. This indicates to estate agents and vendors how much you can borrow and that you are serious about purchasing. Then, once you have had an offer accepted, you can proceed with the full mortgage application.

For those who are re-mortgaging an existing property it’s also vital to ensure you start researching a new deal around six months before the current one expires, in order to avoid slipping onto your lender’s expensive standard variable rate.

In recent years, with interest rates at a record low, the vast majority of homeowners opted to fix their mortgage. However, mortgages that follow the market are now seeing a surge in popularity. In a survey of buyers and sellers in December, Savills Research found the number of people considering a variable rate or tracker mortgage more than quadrupled, compared to those surveyed in August. Conversely it found a marked decrease in the numbers of aspiring buyers considering a fixed rate, with the number considering fixing for five years falling by 15 per cent.

A number of clients are opting for variable rate deals with no early repayment charges. They plan to move onto a fixed-rate mortgage once pricing comes down a little. However, this approach may not suit everyone – if you would struggle to pay your mortgage were rates to rise further, then a fixed-rate mortgage, while more expensive, will at least give you certainty.

The pricing of fixed-rate mortgages, which soared after the mini-Budget, continues to drift slowly down, with five-year fixes breaching the 4.5 per cent barrier last month and expected to drop below 4 per cent in the weeks ahead. We could see five-year fixes priced below base rate later on this year.

Further information

Contact Mark Harris

SPF Private Clients - Mortgages

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