The Mortgage Market Review, which took effect in 2014, imposed
“affordability criteria” on lenders. In simple terms it aimed to rein in
high-risk mortgages. Like any change it triggered speculation about its
potential effects.
Almost a year later, mortgage approvals remain high, while house prices
are currently holding fairly steady. So what does this mean in practical
terms? Well if you are thinking of buying a house, here are some questions
you might want to consider.
Is Now The
Right Time For Me To Buy?
One of the key points to understand about house-buying is that it
involves a lot of expenses in addition to the actual price of the house.
Along with the infamous stamp duty (on homes costing over £125K), there are
likely to be fees for solicitors and surveyors as well as mortgage-arrangement
fees. These all need to be factored in to your rent v buy calculations.
Some mortgages impose an early repayment charge if you end them before
the full term of the loan (e.g. if you move house). Likewise if you use
an estate agent to help sell your house, you will pay a fee for their
services. Therefore it is a good idea to think carefully about how long
you will need to stay in a house to make all these expenses worthwhile.
It can also be a good idea to factor in a margin for adjustment. In other
words, where would you stand if house prices stayed steady rather than
rising? What about if they actually fell slightly? If you feel
uncertain about any of these points, then renting may be a better option for
you.
I am Ready
to Buy, How Do I Reduce My Mortgage Payments?
The good news is that lower interest rates can feed through into lower
rates on loan products, including mortgages. There are still great
mortgage deals out there. The trick to being able to take your pick from
the low-cost mortgages is making yourself as attractive as possible as a
customer. There are basically three steps to doing this. Firstly,
put together as much of a deposit as you possibly can. Secondly, make
sure your credit record is sparkling clean. In particular make sure that you
avoid being scored negatively for reasons you can easily address. For
example being on the electoral roll is a plus point for your credit score so
make sure you are. Also make sure that any actual mistakes are
corrected. Thirdly make sure that you stay within the affordability
boundaries laid down by the Mortgage Market Review.
You can expect a prospective lender to check this thoroughly, so doing
your homework in advance can be a useful exercise in seeing yourself as others
see you.
What
Happens If Interest Rates Go Up, Or If They Go Down?
If you are on a fixed-rate mortgage deal then any changes in interest
rates will only affect you once the fixed-rate term comes to an end. If
mortgage rates rise then you can reasonably expect this to feed through into
your mortgage repayments. Therefore in addition to all the other
questions we’ve just discussed above, it is also advisable to think about how
you would cope in this situation. In principle lower interest rates
should also mean lower monthly repayments. It would, however, arguably be
very risky to base a financial strategy on this happening. In practical
terms, if you are planning to make a house a home and stay in it over the long
term, say at least 5 years, then it is entirely possible that you will see
interest rates rise and fall during this period. Your financial strategy
needs to be able to cope with both scenarios.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT
KEEP UP REPAYMENTS ON YOUR MORTGAGE
For more information please do not hesitate to
contact Catherine Doyle at Ward Williams Financial Services Ltd on 01932 830664 or
by email catherine.doyle@wardwilliams.co.uk.