Rise in Interest Rates Prompts Increased Activity
With interest rates on the move, the mortgage rates on offer look more tempting than ever. This could be the perfect time to buy.
Chartered surveyors e.surv reported an increase in mortgage activity over the course of August, most likely prompted by the Bank of England’s decision to increase the base rate to 0.75 percent on 02 August.
Conventional wisdom suggests that such an increase will usually have a negative impact on the property market. Higher interest rates mean less attractive mortgage deals, after all. However, with many lenders freezing the fixed rate deals on offer, the opposite has been the case. In this age of million pound mortgages, a quarter of a percentage point can make an immense difference, so borrowers have been snapping up the most attractive mortgage deals while they still can.
The higher the deposit, the better the deal
The survey observed an across-the board increase, both among first time buyers with negligible deposits to put down, and among large deposit borrowers, defined for the purposes of the study as those with a deposit of at least 40 percent.
e.surv director Richard Sexton commented that the fundamental rules still apply, in that the very best mortgage deals are available to those buyers who have more available put down. However, he added: “There are still equally good opportunities for those with less cash to splash.” The point to keep in mind is that these opportunities are likely to vary from one part of the country to another.
London attracting the big spenders
With everything else that is going on in the economy and concerns over the effects of Brexit, there have been numerous concerns voiced over the past year with regard to the London property market. Yet while it has certainly experienced a few stutters in 2018, the inescapable fact is that this is still where the big-money property spenders want to buy. More than 40 percent of mortgages taken out in the capital were to what e-surv called large deposit borrowers.
Buyers without the cushion of a large deposit were more common to the north of England. In Yorkshire, large deposit borrowers accounted for less than 24 percent of the market, while small deposit borrowers, where the LTV is 90 percent or more, accounted for more than 30 percent. Back in London, only 12 percent of buyers were small deposit borrowers.
Pattern set to continue
At present, the mortgage rates on offer remain largely unchanged, and the lenders can expect to stay busy throughout October, as new buyers jump on the property ladder and existing borrowers decide now is the time to transfer to a fixed rate deal.
It is highly likely to be a case of getting them while they are hot, however. Inflation has crept up to 2.7 percent, prompting some economists to question whether the Bank of England will really hold the base rate as it is till next summer.
Ultimately, whether it is next week, next month or next year, mortgage rates will only go one way, so this really is the ideal time to buy.