The major factor which impacts mortgage rates is the Bank of England base rate. Apart from that, there are various other factors that directly or indirectly controls the mortgage interest rates in the UK. The covid-19 pandemic has affected the disposable income of home buyers and lenders have come up with alternative criteria for affected applicants.
For example, if you are self-employed and used the furlough scheme or other self-employed grants, you might be considered as high-risk applicant for mortgage purposes. It doesn’t mean all the lenders would consider a low mortgage affordability for you. A specialist mortgage adviser would be able to assist you to find a suitable lender who would provide you the required loan amount.
Other factors that impact the mortgage interest rates
• London Interbank Offered Rate (LIBOR) indicates the market price of money.
• The number of repossessions and unemployment rate can be taken as indicators of the level of risk of lending money, the higher the risk, the higher the rate.
• Competitiveness of the mortgage market – Lenders are in a competition to get your mortgage. Lenders eventually drop the rates if other lenders are offering attractive rates.
• Your loan to value ratio (LTV) – this is the percentage proposition of the amount you want to borrow, to the property value. The bigger your deposit, the smaller your LTV, which in turn leads to a lower interest rate.
• Your credit score – It is a rating based on your borrowing history, financial circumstances, and other factors such as whether you have moved address frequently. This shows how reliable you are to lend to.
It is important to highlight that mortgage rates vary with different type of mortgages.
Impact of the inflation
What is inflation?
Inflation is the rate of change in the consumer price of goods and services. It can be measured in various ways. But the most common way is to use Consumer Prices Index (CPI) and the Retail Prices Index (RPI). It compares the prices of consumer goods in the current year with the preceding year.
Inflation & my mortgage?
Inflation is critically affecting on business decisions. Bank of England is pretty much concern about inflation when establishing interest rates. When the inflation is likely to go up soon, they tend to increase the interest rates with the intension of subdue and vise versa. Hence inflation highly impacts mortgage rates. One way to get rid of this is to select a fixed rate rather than a tracker rate.
Is there anything I can do?
The main shield against inflation is choosing a fixed rate mortgage plan. This works as an assurance from inflation changes for a period. But the main problem is fixed rates are quite expensive. The fixed rates vary from lender to lender and with the type of mortgage. The wise action is to get the help of a specialist to guide you through different products.
Economic circumstances
How the economic strength can affect.
A strong economy builds a higher demand for consumer goods & services including property. It is a sign of a growing economy when the GDP and employment rise. In a situation where the demand goes up, the mortgage rates also eventually tend to increase. That is because, although there are more people with higher buying power, the lenders have a finite amount of money. The Interest rates affect house prices, as a result property values also expected to rise during such situations.
Present situation of the property market
The changes in the property market are mostly depend on the location. But as a rule of thumb the principle of supply and demand affects mortgage market regard less whether it is on Scotland or Wales. When more houses are building or reselling, there can have more demand for mortgages. This leads to rates go up. In the same way, if there are more people renting than buying, this leads to negative interest rates. If
If there are lesser number of new builds and a higher number of renters than buyers, it is a sign to expect lower mortgage rates.
Implications of the pandemic
We experienced the historical lower mortgage interest rates in last Christmas due to the Corona virus. The bank of England base rate slashed to 0.1%. As a result of the ‘Stamp duty holidays’, more people are in a hurry to complete their mortgage work within the holidays. However, the impact of coronavirus on the UK economy has also meant that banks and building societies are being pretty much cautious with their lending. The truth is that, so many mortgage deals have been removed from the market.
Is this the time to remortgage?
Hence there has been a historical fall in interest rates on fixed-rate mortgages. This is the perfect time for your remortgage or purchase. Somehow if there is a higher ‘Loan to Value’ for your house, it would lead to a limited choice. But the good news is, with the beginning of summer, 2021, the lenders seem to move back to higher LTV such as 90% and 95%.
So, make use of the opportunity, and complete your re-mortgage before the bell rings.
Your home may be repossessed if you do not keep up repayments on your mortgage.
For more info visit site: https://imbonline.co.uk
