Homebuyers who have been given a mortgage offer should act as quickly as they can to get their dream property, as financiers are currently offering products for half the time they used to.
Due to rising interest rates, mortgage providers are only able to provide a deal for an average of 21 days at the moment, which is a drop from 42 days earlier this year, The Times reported recently.
Those wanting to get on, or climb, the property ladder, therefore, have been encouraged to waste no time searching for their ideal home, so they can use their provisional mortgage deal to secure an offer on the house. Without this, they will be at a disadvantage compared with other buyers. They could even find their mortgage deal has changed and the rate has gone up the next time they apply for it.
The Bank of England base rate is currently 0.75 per cent, having increased from 0.5 per cent in March. Prior to this, it was 0.1 per cent before being hiked to 0.25 per cent in December 2021, and then increased again in February 2022 to 0.5 per cent.
It is due to review at the beginning of May, when it could rise again. Catherine Mann, former economist for Citigroup and a member of monetary policy committee (MPC) for the Bank of England, told The Guardian the base rate could increase further in response to the current high levels of inflation.
“Monetary policy needs to keep inflation expectations anchored; by doing so now, less tightening will be required later, when demand may still be weak,” she stated.
In fact, some experts predict the MPC will take the base rate to as high as 2.25 per cent by the end of 2022. If this happened, this would force financiers to boost their mortgage rates considerably.
Two-year fixed-rate mortgage rates have doubled since September, while the rate increase of five-year fixed products is not far behind. Therefore, homebuyers can expect to pay a lot more for their loans than if they had bought several months ago, even if they choose the traditionally safer fixed-rate mortgages.
Consequently, Moneyfacts’ Eleanor Williams advised: “Those hoping to secure a new mortgage may wish to act sooner rather than later.”
The average two-year fixed-rate mortgage this month had already increased by 0.21 percentage points from March. At the same time, the typical five-year fixed-rate loan rose to 3.01 per cent from 2.88 per cent over the last month.
First-time buyers (FTBs) will be particularly impacted, with the average age of buying a property having risen from 29 to 32 because the time it takes to save enough money for a deposit, reported What Mortgage. Additionally, homebuyers are applying for longer-term loans so they can afford their repayments, which will increase as interest rates do if they do not take out a fixed-rate product.
As a result, many FTBs could be well into their 60s when they finish paying off their mortgages, particularly if rising rates make it more difficult for people to afford to get on the property ladder in the first place, causing further delay.
This does not just impact those wanting to buy a new home, as households looking for re-mortgage deals also need to act soon.
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