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Mortgage market update

Wed 01 Mar 2017

Thankfully, mortgage rates have remained at historic lows for a number of years, helping under-pressure families to stay on top of their finances. But experts are now suggesting that the golden age of low mortgage rates is coming to an end.

UK mortgage rates and global events

UK mortgage rates are influenced by the Bank of England Base Rate and fluctuations in global financial markets. Increased economic uncertainty since the Brexit vote and the US election has caused a stir amongst international traders and analysts, and this now appears to be filtering through to the rates charged by the UK's major lenders.

According to the latest data from Mortgage Brain, there's been a small increase in the cost of the majority of mainstream mortgage products over the past three months. But before consumers start to worry, it's important to remember that mortgage rates are still very low, so now may be the ideal time to seize the initiative and grab a good deal. And that applies both to existing homeowners and potential first-time buyers.

Existing mortgage customers

Given how low mortgage rates have fallen, it's perhaps no surprise that there's been a surge in re-mortgage activity over the past few months. Yet many homeowners are failing to take advantage because they underestimate the size of the savings they could make.

On a £100,000 mortgage, switching to a new 2-year fixed deal would typically save £96 per month, which equates to £2,300 over the life of the product. So if you're coming to the end of your current deal, you should seek advice and discover how much you could save.

Renters/first-time buyers

Mortgage availability to first-time buyers remains good, with many lenders offering attractive rates even on high loan-to-value products. And this has major implications for anyone considering stepping out of the rental sector and onto the property ladder.

According to a recent study by Zoopla, the combination of high rental costs and low mortgage rates means it is now cheaper to buy than to rent a property in 60% of British cities, including Birmingham, Leeds and Coventry. In Glasgow, renting can be a staggering 28% more expensive than buying - with the median monthly rent on a two-bed home now standing at £596, compared to a monthly mortgage repayment of £450, assuming a 10% deposit.

The outlook

As all economists know, it's impossible to predict interest rate movements with any real accuracy, yet the latest evidence suggests that mortgage rates are beginning to creep up. Some popular products have already disappeared - like the market-leading 10-year fixed rate mortgage from the West Bromwich Building Society. The good news is that rates are still very low, and there's still time to take advantage of the opportunity.

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Type of article: Articles
Category: Owning a house

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