Securing a mortgage in a volatile climate

On September 21st, the Bank of England raised the base rate to 2.25% which in turn has increased mortgage rates. The Bank of England may continue to increase interest rates in a bid to stem surging inflation to reach its target of 2%. The continued rises are unsettling both first-time buyers and those remortgaging, with mortgage deals being removed from the market at a pace.

How do base rate increases affect my mortgage?

The amount a rise in the base rate of interest will cost you will depend on what type of mortgage you have.

A Tracker mortgage: an increase to the base rate means your monthly mortgage payments will increase.

A Standard Variable Rate mortgage: your lender decides how much, if any, of the increase they would pass on.

A Fixed Rate mortgage: you will only see a change in your repayments when your fixed term ends. If your fixed-rate deal is coming to an end soon, you ought to plan ahead, as acting quickly to secure rates is advised as rates could be pulled and replaced with new higher rates at any time.

What can I do?

Firstly, don’t panic. Lenders are keen not to be caught out by a sudden rate rise and so are taking a cautious approach, lenders still want to lend and they have the money to do so.

Henry Knight, Managing Director of Springtide Capital commented:

“Given the current ongoing situation, it’s vital that people are aware of the terms of their mortgage and the details of their current deal. This is especially important given that the cost of living is increasing so rapidly and may play a part in meeting mortgage payments. Being prepared and looking ahead will be vital in securing the best possible rate and protecting from payment increases.”

If you are a first-time buyer, it is clearly a very challenging time. One of the key things, particularly for first-time buyers is to make sure that your credit record and your finances are in as good a state as possible. Be in a position to supply all the requested supporting documentation for your mortgage application as quickly as possible.

The benefits of choosing a mortgage broker

Brokers will play an integral part in helping buyers through the technicalities and financials of their mortgage process, beyond simply accessing products. In a quickly changing market they are best placed to keep up with product variations and will be in close contact with lenders. By contacting a mortgage broker early, you can explore your options and potentially lock in a more favourable rate before future increases. Over the coming months, both lenders and brokers will be dealing with high volumes of business as economic uncertainty is set to continue.

Henry Knight comments: ‘It is a complicated time in the mortgage market and the place for advice has never been more vital. The role of the adviser has never been so important, and as always, regulated financial advice will help individuals make an informed choice. At Springtide Capital we are with you every step of the way.”

With many variables to consider, whether you’re a first-time buyer or experienced property owner speak to one of our experienced, friendly advisers today to discover the right option for you.

Contact Springtide Capital on 020 8154 7280.


Bank Rate increased to 2.25% – September 2022 | Bank of England

About mortgages | Springtide Capital


The current mortgage market – our brief overview

The present uncertainty around mortgage rates and the general economic outlook has understandably caused some nervousness amongst buyers and homeowners.

What is happening to mortgages?

The Bank of England recently raised the base rate to 2.25% and made it clear that it is prepared to continue to raise rates in order to reduce inflation to its target of 2%.

In response to this, mortgage lenders have increased their rates, therefore making it more expensive for homeowners to borrow money. Furthermore, many lenders temporarily withdrew some of their mortgage products from the market as they wait for the economic situation and interest rates to reach a more stable position.

Lenders are cautious by nature and will take some time to take into account the current and future expected rate rises and, until new products are released which reflect the new cost of debt, there is likely to be a tightening of lending until early 2023.

If a lender has processed the application of a borrower and formally offered them a mortgage, these offers are being honoured. Despite some media reports, lenders are not withdrawing mortgage offers from applicants that have already been approved.

What is expected to happen next?

It seems pretty certain that, with inflation still close to 10%, mortgage rates will rise over the coming months and this will make it more expensive to buy a property with a mortgage. This will undoubtedly deter some would-be buyers from buying at all and cause others to re-think their budget.

Around 300,000 people come out of fixed rate mortgages every three months. These people will need to remortgage at a higher rate than they were previously fixed into. For some, this may not be affordable, and they may need to sell their property and buy something that is less expensive. Others will choose to restructure their borrowing by doing things like utilising ‘interest-only’ mortgages or extending the term of their mortgage to reduce repayments.

During the 2008 global financial crisis and the recent pandemic, lenders worked with borrowers to avoid default or serious financial stress by offering them a raft of temporary reliefs such as payment holidays and penalty-free switches to interest-only mortgages. If necessary, we would expect lenders to do the same again in response to the rapid rate rises.

What should you do?

The property market is cyclical in nature and it is almost impossible to buy or sell property at exactly the ‘right’ time, and the vast majority of people buy and sell based on their personal and financial situation. The market over the next few months will be very different from what we have experienced over the past couple of years, but people will continue to buy and sell property regardless of whether prices are going up or down.

We are here to help.

By engaging with clients early, mortgage brokers can help set expectations, help create a clear understanding of affordability and risks. And while brokers cannot drive down costs, they do have up to date information and visibility on the whole range of products that are available in the market. At Springtide Capital in addition to accessing products, your broker supports you through the whole process, completes the administration for your application and you have access to a case manager who is with you every step of the way. We offer a personal service and are here to help every client find the best possible deal at the best possible rates. Speak to one of our friendly and experienced advisers today.

Contact Springtide Capital on 020 8154 7280.


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