The Bank of England plays a crucial role in the UK’s mortgage market, as it is responsible for setting the base interest rate, which influences the cost of borrowing for banks and consumers. This has a direct impact on mortgage rates and affordability for homebuyers.
In addition to setting the base rate, the Bank of England also oversees financial stability. It ensures that banks and building societies adhere to strict lending criteria to prevent financial crises.
The UK mortgage landscape is constantly evolving, and homebuyers must stay informed about the latest updates to make informed decisions.
This article provides insights into the recent home improvement loan updates from the Bank of England announced on the 23rd of March 2023 and their implications on UK mortgages and homebuyers. Furthermore, we provide you with tips for securing the best mortgage deals in the UK.
Recent mortgage updates and their implications in the UK
Mortgage costs have been settling since September 2022 but are still not as low as the numbers seen in December 2021. As of March 2023, the Bank of England raised interest rates from 4% to 4.25%. This undoubtedly puts pressure on the cost of borrowing.
The rising interest rates have resulted in an increase in mortgage rates, making borrowing more expensive for homebuyers.
There has been no significant positive impact on homebuyers in the UK since the last mortgage update. The surge in UK house prices driven by post-lockdown demand has come to an end, and some forecasters even predict a drop in prices over the next year or so.
Even though house prices are falling, the rising interest rates have deterred potential homebuyers, resulting in a slump in mortgage demand. Mortgage approvals dropped to 35,600 in December 2022, which is the lowest monthly total since May 2020’s lockdown.
The figure is 10% down from November and is attributed to a record rise in the effective interest rate borrowers pay.
Speaking of mortgagors, it is not good news for an estimated two million homeowners on variable rate deals. They will see an immediate rise in their monthly repayments following the rate rise.
Whereas those on fixed-rate deals will not see an immediate change, future deals will likely be more expensive. According to a leading property expert at Zoopla, mortgage rates will likely come down in the next few weeks, but they are not expected to return to the ultra-low levels of recent years.
Tips for securing the best mortgage deal in the UK
The UK property market is quite turbulent at present, and navigating the ever-changing landscape of the UK mortgage market can be daunting for homebuyers.
But by staying informed about the latest mortgage updates and understanding the implications for your own homebuying journey, you can make well-informed decisions and secure the most suitable mortgage deal for your needs and circumstances.
There are several steps that homebuyers can take to increase their chances of securing the best mortgage deal in the UK:
- Improve your credit score: A higher credit score can increase your chances of being approved for a mortgage and help you secure a more favourable interest rate. You can improve your credit score by ensuring you are registered on the electoral roll, paying bills on time, and reducing outstanding debts.
- Save a larger deposit: The more you can save for a deposit, the better mortgage deals you will have access to. Lenders typically offer more competitive interest rates to borrowers with larger deposits, as they are seen as lower risk.
- Use a mortgage broker or financial adviser: These professionals have access to a wider range of mortgage products and can provide expert advice on the most suitable options for your needs and circumstances. They can also help you navigate the mortgage application process and negotiate better terms with lenders.
- Consider additional fees and charges: When comparing mortgage deals, it is important to look beyond the headline interest rate and consider the overall cost of borrowing, including any additional fees or charges. The APR can be useful for comparing the true cost of different mortgage products.
- Be prepared to negotiate: Some lenders may be willing to negotiate on certain aspects of a mortgage deal, such as fees or interest rates. Don’t be afraid to ask for better terms; be prepared to walk away if a lender is unwilling to budge.
In addition to staying up-to-date on mortgage news, it is essential to consider the various factors that impact mortgage affordability, interest rates, and the application process.
By utilising the advice and services of mortgage brokers or financial management advisers, taking advantage of government schemes and incentives, and being prepared to negotiate with lenders, homebuyers can successfully navigate the UK property market and achieve their dream of homeownership.