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Borrower responses to recent rate rises?

Journalist: George Nixon, The Times and The Sunday Times

ended 07. June 2023

Good morning,

I'm covering for The Times the spate of mortgage rate rises we've seen over the last fortnight, and am keen to know what brokers are seeing/experiencing from their clients.

After the mini-Budget it really felt like it was panic, is it less so this time, what are people doing, are people still increasingly looking at variable rates and gambling a bit in the hope this blows over soon? I'm keen to hear insights and also if any clients are happy to chat?

Thanks as always! 

12 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Due to an incoherence and lack of consistent messaging from the Bank of England, borrowers are worried what it’s going to take for the pivot to arrive. Mortgage approvals and house prices are dropping and confidence in the economy is weak. Inflation is starting to fall, and the indication is for further rate hikes. Borrowers are confused, and there’s it’s no wonder!
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Craig Fish
Director at Lodestone Mortgages
There is certainly less panic, as there is this overriding view that rates will be dropping at some point. That said, people have been spooked and are more likely to opt for a fixed rate over 2 years. Most of our clients aren't falling into the lender trap of choosing the lower 5-year fixed rate, as they feel that in 2 years rates will be lower, and we do still have the odd few who are opting for tracker products with no early redemption penalties. Notwithstanding this last week, there is still an air of calmness amongst most of my clients.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
The recent increase in mortgage rates may be due to a number of factors, including rising inflation and uncertainty in the economy. Brokers are seeing an increase in clients looking to remortgage or switch to a new deal in order to take advantage of lower rates than what is available at their current mortgage lender.

However, as with any financial decision, there are risks involved. Clients who opt for variable rates may be taking a gamble on the hope that the situation will improve soon, but there is no guarantee that this will be the case.

Brokers may be advising clients to consider their long-term financial goals and weigh the potential benefits and risks of different mortgage products. This may involve looking at factors such as interest rates, fees and charges, and the overall cost of the mortgage over its product lifetime.
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Imran Hussain
Director at Harmony Financial Services
The majority of clients are taking it within their stride due, that confidence in the economy has taken a massive hit since Trussonomics last year. It will be a while until confidence returns as; currently, some borrowers are confused as to what to do when it comes to how long they should fix their mortgage for 5 years or 2 years with a potential of a new government within the next 18 months and could rate drop once this happens.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
Here are my pro tips as a portfolio landlord when taking out a mortgage in the current market.

1. Stay in the rate know: Keep your eyes on the interest rate trends like a hawk. You don't want to be caught napping.

2. Think long and prosper: Before you commit to a mortgage, whip out your crystal ball and envision your financial future. Will the property be your money-making superstar?

3. Crunch the numbers: Imagine a world where interest rates soar. Can you still Netflix and chill in your dream home? Make sure you can handle the heat.

4. Fixed or variable? It's like choosing between a cozy sweater and a wild rollercoaster ride. Do you crave stability or the thrill of potential savings?

5. Mortgage gurus to the rescue: Seek out the wise wizards of mortgages. They'll sprinkle their magic advice and guide you through the interest rate maze.

6. Plan for surprises: Interest rates can be tricksters. Prepare for it by keeping a stash of emergency funds.
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Adam Smith
Founder at Alfa Mortgages
Many of my clients are currently focused on finding the most effective fix rate solution that guarantees repayment certainty. However, there are a few select individuals who possess the confidence and financial flexibility to embrace the ever-changing market dynamics. These clients are willing to take a calculated risk, anticipating a potential decrease in interest rates in the coming months.
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Graham Cox
Director at Bridging Hub
The recent market turbulence has definitely led to a dampening in demand. Potential buyers are adopting a wait-and-see approach, no doubt spooked by media headlines.

We're still finding that fixed rates are popular for those who want to guarantee their monthly payment. But certainly, discounts or trackers are worth considering now as the early repayment charges can be less expensive, and provide the opportunity to fix later when rates are lower.
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Nick Harris
Co-founder at Quarters
From an agent's perspective, we're seeing a marked increase in prospective buyers being open to speaking with a mortgage broker to see if a better deal is available.

Most buyers have an agreement in principle in place when they make an enquiry about a property which has caught their eye, often directly from their existing lender.

While rates remained low before the mini-budget buyers were happy to continue with their current lender on the assumption that a change would make little difference but of course, they’re now happy to explore other options!
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
The immediate or short-term notice of product withdrawals is having a real detrimental impact on the market.

With consumer duty around the corner as brokers, we are responsible for giving our clients the best advice possible.

They're making decisions on possibly the biggest purchase they will ever make, and for us to tell them they have 2 hours to make that decision or their rate will go up is putting undue stress and forcing them to make a decision.
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Dean Esnard
Director at Magni Finance
The latest interest rises caught everyone by surprise as lenders had been slashing rates and this looked set to continue. The tracker verse fixed rate debate is an interesting one and there are pros and cons for each. But with inflation still worryingly high, it appears the base rate will have to increase further than previously predicted. This now makes tracker rates, which at one point dominated clients' preferences, less appealing. However, the market is extremely volatile with monthly inflation figures driving base rate decisions and everything could change again this month so we will just have to wait and see what happens.
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Fanny Snaith
Owner at Fanny Snaith - Certified Money Coach
As a landlord with a buy-to-let property needing a new mortgage in January, I am seriously considering my options. There is no business sense in having a rental property where the mortgage payments eat up pretty much all of the profit. So yes - sell? ride it out? bring down the capital borrowed? all options but nobody has a crystal ball.... do they...?
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Luke Thompson
Director at PAB Wealth Management
I think there is less panic in the market at the moment than there was back in October. The past week has been the busiest week we have had for purchase applications for clients for several months.

There does seem to be a definite move back to clients being happier to gamble with regard to their interest rate than they were around 6 to 8 weeks ago. It is becoming apparent that rates are on the rise again and people don't want to be locked into a higher rate for any longer than they need to be discounted and tracker rates give customers the potential benefit of falling mortgage costs if rates do start to fall again in around 12 to 18 months.