Mortgages.scot

I am going to start by saying I am at a loss as to how I can be positive or supportive right now. That is how bad it all feels right now. So much going on that is impacting the mortgage market I really don't know where to start. I will say this though. The media is great at fuelling the fire in order to get stories read.

Let's try and leave the reasons for the current position aside for now and focus simply on what it means for mortgages.

Interest Rates

The Bank of England Base Rate is currently at 2.25%, it has been going up steadily since Dec 2021. Up to that point, it was 0.10%. Expectations pre-budget were that rates would go up as high as 3% by the end of 2022.

In order to aid the stabilisation of the economy, it is likely the Bank of England could raise rates by 1% in the next few days or may wait until the next Monetary Policy Committee. This largely depends on their view which no doubt changes daily.

Professional and armchair analysts suggest the Base Rate will need to increase as high as 7% within months. it is far too early to say that with any certainty. I am not saying it won't happen but nobody can be that certain at this time.

All we can do is wait and watch to see what happens next.

House Price Crash

Some are predicting that house prices will fall by up to 20%. This is likely to happen if mortgage rates rise too high, the effect is simple. The number of available buyers will rapidly fall as they simply can't afford the cost of the mortgage. How can that be fixed? Reducing house prices to the point they can afford based on the higher mortgage costs.

Again, it may happen but we need to see what happens with interest rates first.

Current Mortgage Deals

We can see now that many lends are withdrawing some of their cheapest deals and others have withdrawn some and replaced them with new higher rate products. There are some lenders such as Barclays that have chosen to do nothing in relation to their current rates so have some of the best currently available. But that will only last so long.

Every lender has an appetite and policies around how much money they can lend for each product. If people flock to Barclays to get better rates then they will run out of money for those products and also replace them with higher rates.

Summary

I want to be able to say there is something just around the corner that will help. There isn't. Not right now. It is a waiting game. Those that are in a position to get a new rate should be looking now and trying to lock into something as affordable as possible. At the beginning of the year I was seeing 5-year fixed deals at 2.29%, today all I see in terms of new products is 2-year fixed at 4.3% on average. Not ideal but if rates continue to rise it is better than what you could be paying.

One thing does seem clear, rates are not going to come back down to below 1% for many years if at all. The era of low rates is finally over.

Given the way mortgage rates have been moving since December last year I have no doubt borrowers know fine well what they need to do. The cost of living crisis has of course added so much to everyone's financial woes without this as well.

I will be doing regular updates from this point until we have more clarity or certainty of the direction this is heading.