Potential buyers and those looking to remortgage must carefully consider affordability and be realistic in their approach with brokers playing a key role, following the rise in UK inflation to 3.3% for March.
Ben Thompson, director of home moving strategy at the Mortgage Advice Bureau, said: “For those planning a move later this year, the figure underlines the need to keep expectations realistic. A sharp drop in mortgage rates still looks unlikely in the near term, so planning around current affordability levels – and seeking expert advice from a broker – remains key to moving forward with confidence.”
Nathan Emerson, CEO of Propertymark, also advised a considered approach. “At this point, it’s important not to be pessimistic, nor overconfident; instead, we must be finely tuned to being genuinely realistic,” he said.
However, Thompson said buyers should still have confidence to buy. “The market is evolving. Lending is becoming more flexible, with more options available, meaning many buyers may be closer to purchasing than they think.”
Remortgaging is a ‘tale of two halves’
For those remortgaging Thompson said the inflation figures were “a tale of two halves. Homeowners coming off ultra-low fixed rates will see a more noticeable jump in repayments, while those exiting more recent deals may find the change far less significant.”
Rob Clifford, chief executive of Stonebridge, said that advisors will remain key to navigating the uncertain landscape.
“Swap rates remain elevated and advisers need to continue working hard to guide their customers through what is a tough decision regarding their mortgage options. As always, much will depend on the customer’s personal circumstances, while it remains challenging to be confident of where rates will be in 12 months’ time.”
David Hollingworth, associate director at L&C Mortgages, said that L&C’s remortgage tracker shows that the average of the top ten lenders’ best 2-year remortgage fixed rates has already jumped from 3.77% at the beginning of March to 5.01% as of Wednesday, driving the cost of a £200,000 25-year repayment mortgage up by almost £140 per month.
Looking to interest rate decision
“However, there are now signs that the more stable market rates and easing in the outlook for interest rates are allowing lenders to cut their rates back. We’ve seen a growing number of lenders trimming fixed rates as a result,” he said, adding the focus would now be on what happens with interest rates.
“Homeowners will be turning their attention to the Bank of England’s interest decision next week, hoping for clues on the direction of travel for the base rate. Higher inflation typically leads to higher interest rates, but if a resolution can be found and inflation peaks at a lower level than originally feared, it could calm the need for base rate hikes. That would see fixed rates continue to fall.”
He advised buyers to protect themselves against the risk of rates rising further by locking in and reviewing before completing, moving to a lower deal if rates do fall.
