If you are a homeowner, you are no doubt feeling anxious and/or uncertain about what the current financial storm will mean for your mortgage.
At the time of writing, 1,621 residential mortgage products had been pulled from the shelves, according to Moneyfacts.co.uk.
Meanwhile, forecasts interest rates could soar to as high as 6% next year, mean many of you are concerned about what this means when your current deal ends.
But whilst we have heard from many borrowers who are concerned they may not be able to afford repayments if rates were to climb much higher, there are others who are in the process of buying a home and don’t know where they stand.
So, we put some of your questions to Neil Bishop, head of residential mortgages at Mortgages for Business. Neil is particularly well placed to answer your questions as he is What Mortgage’s resident expert, and answers your mortgage queries in his monthly column. You can see his latest advice here.
In the meantime, here are his answers to your questions:
Q: As a first-time buyer I’ve just got a Decision in Principle offer on a house. Do I pull out or go-ahead? I am lost…
A: Understandably, the current situation is very concerning for anyone trying to secure a mortgage. If you’ve had a Decision in Principle accepted, then I suggest submitting the full application to the lender as soon as possible, as this is the only way to secure a rate.
If the current rates are now unsuitable, I’d speak to a broker to see if there’s something else available on the market that you can apply for. There are still options out there, so don’t completely lose faith!
Q: Will my existing five-year offer be lost?
A: If you have confirmation of an offer, you should be okay. At the moment, the vast majority of lenders are honouring applications with offers.
I would say, make sure you know when the offer expires, as you may have difficulty extending that deadline in the current market if you don’t complete in time.
Q: I am due to remortgage in July next year. I am currently paying 3% on a two-year fixed rate. I don’t think we can afford 6% when we come to remortgage next year. What should we do?
A: I’m sorry, this must be very concerning for you. Fortunately, there are some things you can do.
Firstly, some lenders allow you to secure new rates up to six months ahead of your current term ending, which means you can start looking at rates in December/January when we hopefully won’t have hit the 6% level yet.
Secondly, you may also have an option to extend your mortgage term; for example, if you have 20 years left, you could look at a 30-year term.
Doing this will help reduce monthly repayments, and many products allow you to overpay if you have the funds available, which will help pay it off quicker.
Once rates come down, you can consider remortgaging back onto a shorter loan if appropriate.
Lastly, I’d highly recommend speaking to a broker early in the new year to review all your options, as this will give you the best chance of securing a rate most suitable for you.
Neil Bishop is head of residential mortgages at Mortgages for Business. You can see his latest Q&A here.
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