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Navigating the mortgage market

3 min
Female student sat on sofa in home with laptop and paper in hand

More and more of you have been coming to us with questions about getting a mortgage and the mortgage market more generally.

To make sure you have all the information you need, we’ve turned to our very own Iain Stevenson, Head of Dental at Wesleyan Financial Services, to get his expert views on what is happening in the UK mortgage market – along with his suggestions for what you can do…

Mortgage challenges

Mortgages are one of the foremost financial challenges UK residents are facing this year.

While analysts predicted that both inflation and interest rates would gradually reduce over the course of the year, interest rates have continued to rise. We may see them fall in the future, but therein lies the problem – we simply do not know for certain.

The Bank of England raises interest rates to help control the rate of inflation, which is fundamental for a healthy economy where money keeps its value.

It was hoped that by the half-year point, inflation would be under control and falling, therefore increasing the possibility of reducing interest rates for mortgages and borrowing. Unfortunately, it’s been slow progress and we’re only just starting to see inflation drop, with interest rates yet to follow.

Make no mistake, borrowing costs are really starting to bite as more and more people find themselves at the end of their current deals where payments have been fixed at a very low level as a result of the deals that have been on offer during recent years.

In fact, it was recently reported that an average of a £2,300 extra will need to be paid each year in interest payments for the same mortgage which, on top of food costs, energy bills and other associated inflationary challenges, is a real burden on household finances.

So, what should you do?

Mortgage dynamics have changed, and you need to consider your next move carefully. It is no longer a simple strategy to find the best fixed rate and jump on it. You will find that the fixed rates out there are substantially higher than the deals on offer in recent years.

Of course, there is a benefit in knowing what you are paying each month, but purely from a cost perspective, is this the right move? You need to balance your priorities and what you can afford.

A discount mortgage (where the interest rate is set a certain amount below the lender’s standard variable rate) might seem attractive since the discount will continue to apply as rates fall. However, be mindful of redemption charges which could be due if you decide to leave this rate part way through the term if other, more attractive deals are on offer.

What about sticking with the current variable rates? Contrary to popular belief and behaviours, in some circumstances it could be worth sitting tight if you can afford the monthly costs while you wait for the rates to reduce (and potentially better deals).

The benefit of this type of mortgage is you should be able to move quickly if the right deal became available as you are unlikely to be tied into a redemption penalty. This is definitely a risk-based decision though, as there are clearly no absolute guarantees if and when rates start to come down again.

As ever, it’s always worth having a chat with an expert who understands your situation and can walk you through all of the options – taking into account fees, monthly costs, redemption penalties, deals and risks. It would be time well spent given the potential impact of this major cost-of-living challenge that borrowers face.

Your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

All information is correct at the time of publication.

About the author
Iain Stevenson
Iain Stevenson

Head of Dental at Wesleyan Financial Services

Iain Stevenson is the Head of Dental at Wesleyan Financial Services, joining from Aviva in 2003 where he was a Senior Financial Adviser working largely in the Corporate sector. Iain now leads a team of Specialist Financial Advisers across the UK who exclusively work with dentists, their businesses and their families to secure their financial futures.

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