The challenges homeowners face
Shortly after our publication of “Secure A Remortgage – During Unprecedented Times” post, according to data from Moneyfacts, the average 2-year fixed rate in the UK rose to 6.66% on Tuesday, surpassing the previous rate of 6.63%. This marks the highest level since the global financial crisis, reaching a peak not seen in 15 years.
With average 2-year fixed rates hitting 6.66%, a number associated with the devil, many homeowners may feel like they are in a personal hell. The Government and the Bank of England (BOE) share responsibility for the current predicament. As we are all well aware, where politics are concerned, there is either red tape, political point scoring or a need for more sense of urgency. Many want to know who we can turn to in these desperate periods.
Mortgage brokers
Although the question is warranted, we believe that the government should assume a leading role. However, during the transitional phase, it is unexpected yet evident that mortgage brokers are well-positioned to respond to the call. Their task is clear: offering mortgage holders greater flexibility, especially by advising them to reduce mortgage terms and facilitate temporary transitions to interest-only mortgages.
Providing such assistance can lighten the weight of the increased monthly payments resulting from recent rate hikes. Mortgage brokers strive to help, where possible, the well-being and stability of individuals in their mortgaged homes, actively striving to prevent widespread repossessions. Yet, akin to superheroes, they are unable to save every situation. It is crucial to acknowledge that not all circumstances can be rescued, and sadly, some individuals may face the peril of losing their homes and potentially experiencing homelessness.
In the current complex mortgage market, homeowners encounter numerous challenges and hurdles that can make the concept of “sleeping like a baby” feel far from attainable. As dedicated mortgage brokers, we seek to shed light on two crucial aspects that hold substantial influence over the housing market:
- Rate Rises
- Product Choice
Rate Rises: Understanding the Impact
According to Moneyfacts, the average 5-year mortgage rate experienced a slight rise to 6.17% on Tuesday, showing a marginal increase from Monday’s rate but still below the peak of 6.51% reached in October.
Following the crisis sparked by the “mini-budget,” UK mortgage costs had shown signs of recovery, but they have recently surged due to 13 consecutive rate hikes by the Bank of England (BOE).
The BOE surprised many as the rate hit ‘shock’ 5% after a 0.5 percentage point increase, a larger increase than anticipated. This decision directly affects numerous homeowners as interest rates on many mortgages are directly linked to the BOE’s base rate.
Renters are also expected to face higher rental payments as buy-to-let landlords pass on the increased mortgage repayments.
The BOE’s actions are a response to combat stubbornly high inflation. On Monday, Governor Andrew Bailey emphasised that the BOE must stay committed to lowering prices. Many experts believe that additional interest rate hikes are likely in the coming months.
With the ever-changing economic climate, interest rate fluctuations directly impact mortgage affordability. Rate rises can increase monthly mortgage payments, potentially pushing some buyers out of their affordability range. Armed with in-depth knowledge of the mortgage market, as mortgage brokers, we can help existing and prospective buyers understand the implications of rate rises on their financial situation. Until the government and the BOE find a working resolution to this crisis, we can assist in assessing different mortgage options and strategies to mitigate the effects of rising interest rates.
Product Choice: Finding the perfect fit
The range of mortgage products available in the market can be overwhelming for potential homebuyers. Each product comes with its own set of features, benefits, and drawbacks. As mortgage brokers, we serve as valuable guides in navigating the sea of mortgage options. We have access to a wide array of lenders and products, allowing us to tailor the mortgage solution to the specific needs and circumstances of the borrower.
Brokers can provide expert advice on fixed-rate mortgages, tracker rate mortgages and other specialised products, ensuring borrowers make an informed choice that aligns with their long-term goals.
The work of mortgage brokers?
While we creatively made a small reference to superheroism, it is noteworthy that the government is turning to the mortgage brokers sector to assist and provide relief to those facing hardships. The government sees mortgage brokers as potential saviours in these challenging situations.
In truth, brokers hold extensive knowledge of the mortgage industry and remain up-to-date with the latest market trends. Brokers establish close relationships with borrowers, ensuring a deep understanding of their individual needs and financial situations. In a time marked by rate rises and limited product options, the pivotal role of brokers in providing homeowners with peace of mind justifies the government’s reliance on their expertise.
In general, mortgage brokers have the potential to be modern-day superheroes by proactively assisting individuals in effectively managing their mortgages and preserving their homes. 
At Connect Mortgages, we can accomplish this by offering personalised advice and tailored product options that align with the unique needs of borrowers and evaluating the effect the rise of interest rate has on their mortgage payments and future affordability. By taking proactive measures and providing support in the short, medium, and long term, we can truly make a meaningful impact in helping individuals effectively navigate their mortgage obligations and maintain a healthier future.
