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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
Interest rate hikes: Would a 10-year fixed-rate be sensible?
My five-year fixed rate comes to an end in July and I am becoming increasingly concerned about future interest rate rises. I have noticed the Bank of England keeps raising rates and all the forecasts seem to suggest this will carry on.
I have heard homeowners now have the option to fix their mortgage rate for 10 years. I can see the benefits of this but is there anything I might need to consider first?
Answer
It’s great that you are looking to the future and thinking beyond the next few years. A 10-year option is great, but there are a couple of downsides.
Firstly, generally speaking, five-year fixed rates tend to be more competitive than their 10-year counterparts. If rates were to stop going up, and even go down over the next five years, you could find that you end up paying a lot more on the 10-year fixed.
Unfortunately, only hindsight will be able to tell if this was the case.
The second thing is committing to the mortgage for such a substantial amount of time – what if you want to move home or pay the mortgage off, or even borrow more money for home improvements?
There’s no guarantee that this would be available under the scheme. The key point to consider is that you are locked in for a much longer period, so I would advise you consider all your options before securing a deal.
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Question
What sort of account should we use to save for a deposit?
My partner and I have started putting some money aside in my savings account for our house deposit. It’s an easy access account which I opened quickly with my current account provider just to provide a place to separate our day-to-day spending from our savings.
The rate is very low, however, and I have decided to do some research into other savings options. I would be keen to get an expert’s view on whether it’s worth saving into the markets and opening a stocks and shares ISA to help us save?
Between us we can afford to save £200 a month, which isn’t a lot, I know. It’s a long-term plan and we don’t expect to become homeowners for five years at least. We hope to put additional money in if, for example, we receive financial gifts at Christmas/birthdays or if we happen to receive a windfall (you never know).
Are we wise to invest in the markets? Or should we stick with our low easy access rate?
Answer
Now I am not able to advise you on any sort of savings and investments, I am afraid – that’s a job for a financial adviser.
What I would say is that if you invest in stocks and shares, your capital is at risk – much less so for a traditional savings account.
Using an ISA, such as the Lifetime ISA, could be beneficial, but your best port of call here is a financial adviser who will be able to take you through the different options and outline any risks and benefits. Good luck!
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Question
Can I get a mortgage if I am unemployed but have savings?
I hope you can help. I am a single mum and I have recently separated from my partner. We have sold our family home and the proceeds have been split between us equally.
Currently, my son and I are living with my parents but they don’t really have the space and we need to move out. I have £115k in my bank account which is from the proceeds of the sale.
If I put down £30k as a 10% deposit on a house would I be able to use the remainder of the savings to fund the mortgage repayments until I get a job? I expect this to be in two years, when my son starts secondary school and I don’t need childcare.
My ex-husband pays around £400 a month for child maintenance. I am looking at buying a two-bed terrace which in this area is around £300k. I have a good credit record.
Answer
I am afraid that you will find it really hard to get a mortgage without an income. I understand your plan to live off savings, but from a lender’s perspective, this is a finite amount of money, and if you were unable to get a job and had used up your savings, you would be stuck.
The good news is, once you are working, lenders will be able to use this income, plus your child maintenance, tax credits, and child benefit when assessing affordability. I wish you the best of luck.
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Question
Can I get a mortgage with my parents?
I am 35 and still living at home. I should probably point out – I left home and then returned in order to save for my deposit with rental costs stinging me for the majority of my salary.
It’s becoming really disheartening for me to see house prices rising so fast and the higher they go the less valuable my pittance of a deposit feels. So far I have managed to save £24,000 by putting my previous rent (£1,000) away each month for two years. But in London, where I want to buy, I can’t afford much on this.
My parents have taken pity and offered to help me out. They are planning to release some equity from their home and use it to help me with a deposit. However, with prices being so high we also think they may need to help me with repayments.
Is there any way they can help me buy, help with the affordability but for me to own the property independently?
Answer
I really feel for you – it can feel so hopeless. The good news is there are lenders who will allow your parents to stand as guarantors for your mortgage, and thus their income is assessed when looking at affordability.
One option available to you is something called ‘joint borrower, sole proprietor’ which means that your parents can help out with affordability by joining you on the mortgage, but just you will own the property.
I would also, as an aside, encourage you to look at shared ownership, as this may make help to make things more affordable.
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