UK mortgage rates soar: Here’s what you need to know as a first-time buyer

Uncertainty about the UK housing and mortgage market is widespread among first-time buyers.

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Mortgage products are being withdrawn, payments are doubling and lenders are backing out of agreed deals. Anxiety and uncertainty among Britons looking to buy a home soared last month after Finance Minister Kwasi Kwarten announced a ‘mini-budget’.

his controversial plans foresee Sharp tax cuts and looser rules and regulations for businessesAs the cost of living crisis continues in the UK, Mr Kwarteng argues the budget will boost growth.critics say it will mainly help the rich When make Britain more unequal.

This mini budget has one plus for those looking to buy a home. Stamp duty, a tax that many buyers have to pay when buying real estate, has been reduced.

Reduction of stamp duty

Stamp duty is only paid by those whose property is worth above a certain threshold, and for first-time buyers this is already set at a level higher than average UK property prices before the mini-budget takes effect. Therefore, the change will not affect many first-time buyers.

While the cuts will benefit some buyers, other higher costs could erode profits, explained Paresh Raja, CEO of financial services firm Market Financial Solutions.

“Reduction of stamp duty […] It definitely helps. Unfortunately, many other factors are simultaneously making life difficult for them, including inflation, interest rates and turmoil in the mortgage market,” he told CNBC Make It.

Francis Gill, financial adviser to London-based Humboldt Financial, has a similar view.

“For people who could barely afford to buy but still saved the cost of stamp duty, this should be a win and could expedite the purchase date…but what they saved with the SDLT [stamp duty] Rising mortgage rates will eat them up quickly.”

What about mortgage interest rates?

The housing and mortgage sector has been particularly affected, Lenders withdraw hundreds of mortgage deals or price them at much higher levels After both sovereign bond yields and Bank of England interest rate expectations surged. This will push up costs for borrowers as the BOE’s base rate will help price all types of loans and mortgages in the UK.

Average interest rates for two-year fixed mortgages topped 6% this week, according to Moneyfacts data. Just a year ago he was up from 2.25%. Mortgage Broker Technical Mortgage Manager and Advisor John Chercol thinks this could go higher.

“Rising costs for lenders, a volatile economic outlook, and service levels and future interest rate increases could mean an average rate of 7% in the new year,” he said.

Many borrowers and soon-to-be borrowers are already concerned that they cannot afford to make mortgage payments that have more than doubled in thousands of cases. So research and expert advice are important for anyone looking to buy a mortgage deal right now, Gill explains.

“Make sure your credit score is an accurate reflection, make sure you’re talking to an independent broker, consider fixing it for a period of time, and consider early repayment fees,” he suggested. increase.

“It’s important to speak to someone who can analyze your situation professionally. Really, consider if interest rates are this high in a couple of years, and if mortgages are affordable.” he adds.

Market points to a difficult 12 months

Nicholas Mendes

Technical Mortgage Manager for John Charcol

What’s Next for the Housing Market?

Mendez explained that the market is expecting a “challenging 12 months.” Lenders are likely to raise interest rates even further, and mortgage base rates may rise, but the recession and cost-of-living crisis are likely to put pressure on homeowners, he said.

But as the next year unfolds, not all is pessimistic.

“Real estate prices are expected to fall in 2023. Similarly, we expect interest rates to fall slightly from today’s highs,” explains Mendez.

Raja believes the market could stabilize, or at least be less roller coaster than the past two weeks. “After this particular period of upheaval, the lending market will calm down. Such fluctuations in interest rates and commodities will not be drawn out in the future,” he said.

This will at least alleviate some of the uncertainty that homeowners currently face.

For those looking to climb the real estate ladder, the turmoil may have a long-term silver lining as others are being forced to leave the real estate market, Gill notes. .

“If many bi-touret landlords leave the market, there could be an influx of properties for sale and lower prices. They may actually be able to get on the ladder,” he believes. .

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