iNews mortgage mayhem

The market is not in the position it was back in 2008 yet, as, for now at least, first-time buyers can still purchase with a 5% deposit. There's no doubt that the cost of borrowing is increasing, however, faced with the alternative, namely the ever-increasing cost of renting, a mortgage is still a more comfortable alternative. The cost of exiting a fixed rate deal is very rarely the best advice. Lenders generally apply early repayment charges of between 3% and 5% of the loan, which would need to be paid when exiting a mortgage deal during a fixed rate period. On a mortgage loan of £250,000, the early repayment charge will generally be £7,500 to £12,500. Borrowers coming out of fixed rates now will be paying circa 4%, so why would someone exit a 2% fixed rate, pay an early repayment charge to jump onto a 4% rate, in order to avoid the 'potential' of paying a 6% rate in two years' time? For example, a £250,000 mortgage over 25 years at 4% is £1,319.59pm, at 6% it would be £1,610.75, a difference of £3,493.92 a year. Any benefit is usually eaten up with the fees paid on early exit. As the past couple of years have shown, a lot can change between now and then, so keeping your current fixed rate will often be the best advice. But be sure to review your situation six months before the end of your deal.

You would imagine that most lenders would honour existing offers and rates secured already, but this market is seriously volatile and who knows what will happen? We are incredibly busy currently with many people still wanting to move ahead with purchases and remortgages. At the end of the day people still need homes. If you're six months away from the end of your current product, you should speak to a broker ASAP. Remortgage rates may be able to be secured at this point rather than waiting.

It's mayhem in the mortgage market right now. Lenders are pulling deals left, right and centre, sometimes with just a few hours' notice. It makes it very difficult to advise clients with confidence or get deals over the line. Truss and Kwarteng really have caused chaos with their half-baked mini-budget. Total amateurs. For clients who need to remortgage in the next year, we're recommending they lock-in now if they can afford to pay any Early Repayment Charges. There's a large risk mortgage rates could be 6 or 7 per cent in a few months' time, which would cause a house price crash, large scale repossessions and economic carnage. And that's no understatement.

I wish I had a crystal ball to tell my clients what's going to happen with mortgage rates but sadly not. However with inflation so high and the sterling so low, further increases in the base rate seem very likely. How long will rates stay high, one, two, or five years? It's impossible to know and anyone saying they know for sure is a liar. As always, when it comes to big financial decisions for both individuals and businesses, you should not panic and seek your full range of options from a professional, therefore making an informed choice.

I recently had a client who was purchasing a new build property. Due to delays on the build, we requested an extended mortgage offer, which is quite common with new builds. The lender, however, decided to reassess the mortgage affordability using the new cost of living parameters, which meant that the client could no longer borrow as much as they needed for the purchase of the property. The initial lender's only options given to the client were to either find £12,000 a week before they were due to complete or go to another lender, where the rates would have been considerably higher. Luckily I escalated this to a senior contact at the lender and we got it resolved, however without intervention the client would have lost the property that they had spent months planning to move into.

There is a long queue to log into HSBC to submit a new application, current wait times are over an hour. Digital Mortgages are pulling all their rates with immediate effect. The email was sent at 12pm stating that they have stopped with no notice. This is unusual and we have not seen this since Covid. Buckle up.

Winter is certainly coming for us mortgage brokers, with darker days on the horizon. We're now seeing a huge uplift in clients willing to incur thousands of pounds in early repayment charges to come out of their deal early in fear of how high they will go in the near future. There is no one-size-fits-all around this at the moment and people need a real in-depth conversation with a professional about the pros and cons of coming out of their deal early. We're seeing a growing number of first-time buyers come back to us who have finally secured a property after months of searching. However, as soon as you quote the rates that are now available, they are in shock at how much they have increased in such a short space of time, and often put that proposed purchase outside of the budget they can afford.