It’s the news that mortgage brokers can’t seem to get away from, despite how hard they might try. Mortgage rates in the UK have reached their highest level since 2008. Across the market, mortgage rates have seen interest peaks which have caused real concern, but that doesn’t mean you can’t arrange a policy for your clients which features a more manageable rate less heavily impacted by the increase.
As an adviser, it’s easy to panic and disregard planning for the future with no end to the confusion in sight. However, this article will aim to provide you with some clarity on the situation, so that your next few steps can be put in place towards maintaining some sense of stability in the market. This includes an analysis of what the rise in two-year fixed mortgage rates means for your customers and the Mortgage Charter is providing some optimism.
What Rising Mortgage Rates Means for UK Homeowners
It’s not a great time to be a homeowner in the UK, which makes the job of a mortgage adviser rather difficult. Homeowners who are coming to the end of their deals will be faced with a difficult question as to whether they should remortgage their home, at the cost of paying a much higher fee each month than what they would have been in recent history.
Representatives from major high-street banks and building societies were all called to discuss the rate increase with the Treasury Committee. The questioning looked to ease concerns on behalf of customers and lenders alike and identify what the wider impact of the rate increase means for the housing market in the UK. Admissions from the banks and building societies suggest customers will need all the support they can get with an expectance of “more customers with financial stress”. This could lead to an increase in homeowners struggling to keep up with mortgage repayments which will in turn lead to further financial strain that might barely be manageable in the short-term, let alone the distant future.
A recent article published by the BBC recounts that mortgage providers have stated “people fixing deals at rates now would typically face an increase of about £350 a month in their repayments”. The numbers coming out aren’t at all inspiring of a bright future where being a homeowner isn’t racked with uncertainty, yet experts have suggested that due to the number of options available to customers, things aren’t quite as bleak as some you might think. This is of course where the role of the mortgage adviser comes into the equation, as you work with your customers to identify the best lenders and arrange the best policies, even as providers exit on deals and hike up prices. Under your guidance, the ‘struggling households’ will require additional care and attention so that they aren’t forced into overpaying or extending their policies when they will be unable to keep up with the repayments.
When Will Mortgage Rates go Down?
The good news is, there are already plans in the works that are designed to support both customers and advisers across the UK, most notably the new Mortgage Charter. The Mortgage Charter is the new set of standards, approved by the FCA, which will help mortgage customers struggling with rising rates. Mortgage borrowers who are in a position where they are up-to-date with their payments but are still struggling to consistently meet long-term deadlines now have the opportunity to either:
- Switch their mortgage to an interest-only policy for six months
- Or extend their mortgage term while maintaining the option to switch back to the original term within six months.
With that in mind, it’s important to note that even amidst the chaos of the market there are plans in place to help you and your customers find the ideal solution for more manageable repayments that won’t impact credit scores or call for new affordability checks. Lenders have also agreed to not action repossessions within a year of first missed payments, which we will provide a great deal of peace of mind for any customer.
Finding your Customers the Right Mortgage Deals
While the forecast isn’t phenomenal right now it might not be as bleak as things might suggest, and providing your customers with the right mortgage policy should still be the priority of every broker reading this. A good place to start would be to target your customer base of existing homeowners looking to move or remortgage their house, who represent the lowest-risk borrowers. Communicating with our panel of lenders will allow you to source the best policies for your customers, which will in turn ease their concerns in taking steps to mortgage and maintain their property.
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