Now is a great time to consider borrowing for current and aspiring homeowners – Mortgage Update with Yellow Brick Mortgages
We recently caught up with Greg Marcham, Managing Director of Yellow Brick Mortgages to talk about the current mortgage market for existing and aspiring homeowners.
Yellow Brick Mortgages are our preferred mortgage broker. They enjoy a 5 out of 5 rating on Trustpilot based on 1700+ reviews so, they come highly recommended.
Interest rates are low!
Interest rates are very low, right now. At the time of writing the lowest rate out there on a fix is 0.88%. This is because the bank of England’s base rate is currently set at 0.1%. Older readers may remember rates much higher for the mortgage on their first home. In 1979 UK Interest Rates reached an all-time high of 17%!
We don’t know how long it will stay there, but a low Interest Rate means cheaper borrowing.
Let-To-Buy and second home mortgages becoming more popular
Greg said this area of the market is growing. Sometimes homeowners become accidental landlords if for whatever reason they can’t sell their property but still want to buy another. Increased popularity in this type of purchase has attracted more mainstream lenders which, in turn, means more options for customers with better rates.
Speak to a mortgage broker, early to find out what your options are
A broker can talk you through the benefits and drawbacks of any particular course of action. You need to take into account your own personal circumstances as this will form the basis for any amount borrowed. Speaking to friends and family can be a good way to start thinking about your options but their personal circumstances may be very different from your own.
First-time buyers and The Bank of Mum and Dad
Although rates are very low at the moment (which, is particularly helpful for first-time buyers) the size of the deposit available will impact the rate that a lender is prepared to offer. Let’s say that you save a 5% deposit, and a bank offers you a rate of around 3%, for example. By gaining another 5% from your parents you might qualify for a better rate closer to 2%.
The better, lower rate might save you around £60-£80 a month, depending on your term. That may not sound like much but, it might be enough to pay an entire utility bill, each month. Which, is significant for a first-time buyer.
Parents may have built up more equity in their property. This might translate into a much lower loan-to-value (LTV) against their property because a bank would see them as lower risk.
Greg has seen examples of parents gifting deposit amounts up to 20% with the son or daughter also putting down 5%. In this scenario the lender would likely offer even better terms on the mortgage.
Should you get on the ladder, now with a 5% deposit or, save some more?
Greg talked about a structured savings plan and gave this example:
If you have inherited some money and it’s enough for your 5% deposit it may be unwise (looking at current trends) to wait and save more, if feasible, for you. But, if you have saved a 5% deposit using a structured savings plan then there’s a judgement call to be made. Does it make sense to wait, and save more for a larger deposit and (potentially) a better rate?
For most first-time buyers, owning is better than renting so the desire to buy now is a strong one but, always get professional financial advice that’s tailored to you.
Now could be a good time to finance house upgrades and extensions
Greg said, you ‘can’t really go wrong’ with rates where they are, now. Depending on the work you want to do, you are usually adding value to your property and it won’t cost you a great deal to borrow. Yellow Brick is seeing lots of refinancing for kitchens, bathrooms, extensions, and garages. This type of borrowing has become very, very popular over the last few months.
At Watsons, we offer a range of professional services to meet your property needs.
Whether you’re on the hunt for your first home or have owned your home for many years, our team will provide a first-class buying and selling experience.
***Your home may be repossessed if you do not keep up payments on your mortgage***