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Where's the mortgage market at?

Where on earth do we begin?

When Ferris Bueller (bear with us) uttered his eponymous lines about life moving pretty fast, he probably (alright, definitely) didn’t think it would apply to the UK in 2022. Yet, those words couldn’t be closer to the truth. To be fair, it makes us worry about whether what we are about to write will still be relevant by the time you read it. But we’ll give it a go.

So, what's happened since last we spoke?

Perhaps this would be better framed as what hasn’t happened. Anyway, we’ll try and sum up the relevant points succinctly. Truss has been and gone. The previous chancellor announced a mini-budget that was received with all the joy of a thunderous kick in the shins by the markets. The pound has tanked. Inflation continues to rise. Sunak is now at the helm. And, perhaps most importantly when it comes to why you are reading this, mortgages have made more headlines than Boris Johnson did. On a bad day.

You will know no doubt have seen that mortgage rates have been rising, predominantly on the back of the horror stories we have already briefly laid out. The market remains volatile and exceptionally difficult to predict. We haven’t even mentioned the continuing war in Ukraine and how that’s compounding the misery of our own government’s making.

As the money markets are now factoring future Bank Rate increases into next year to where we think (although cannot guarantee) interest rates will peak, the cost of fixed rate mortgages is probably already somewhere close to a peak for the current cycle. Nevertheless, the longer they remain around current levels the more people will be affected as they come to the end of their current fixed rate or think about buying a new home.

Which product should I take?

Back in the summer, the choice of which mortgage product to take if it was time to arrange a new one wasn’t really much of a choice. Broadly, it was fixed rates all the way. But this may not be the case right now.

When evaluating what to do next with clients, we are giving serious consideration to trackers and discounts. Right now (or at least when we wrote this), borrowers can obtain a discount from a lender’s Standard Variable Rate that offer pay rates around the 2.5% mark.

With both 2- and 5-year fixed rates currently priced above 5%, we would have to see significant rises in bank rate for borrowers to be worse off over the course of the loan. Now, of course, as we have already said, it’s impossible to predict the future, but it is certainly something that we will discuss with you, with your unique circumstances in mind.

Only personal advice will do

We’ve said this before, but it is perhaps the single most important message we can give right now. Generic advice isn’t worth the paper it is written on. Only by evaluating your individual circumstances can we make the right recommendation. If you need us, you know where we are.

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