Rising Mortgage Rates: Impact on North East Homeowners

Today’s increase in Bank of England rates has sent ripples of concern among North East homeowners, particularly those with impending remortgages or seeking new deals. 

The decision by the Bank to raise rates by 0.5% has sparked discussions about the potential consequences and the steps North East homeowners should consider taking.

For some, the immediate impact will be felt in their monthly budgets. 

North East homeowners on typical tracker mortgages can expect an average increase of £47 per month, while those on standard variable rate mortgages may face a £30 jump.

However, it is worth noting that approximately 4 out of 5 mortgage customers hold fixed-rate mortgages, providing a temporary shield against immediate payment adjustments.

Nonetheless, prospective North East homebuyers and those planning to remortgage soon face the daunting prospect of higher repayments. 

However, most lenders priced in these increases last week, so there will be a little change in today's fixed rates compared to yesterday.

Seeking advice from a mortgage broker becomes crucial to secure the best possible rate amidst the evolving landscape (do call us if you need to talk to a qualified mortgage arranger).

One viable strategy for borrowers is to consider increasing their equity in the property, thereby qualifying for a lower loan-to-value ratio.

Banks and building societies tend to offer preferential rates to lower-risk customers, and increasing equity can contribute to more favourable terms. I have heard many parents are giving their children some of their inheritance early to reduce their mortgage exposure.

Additionally, borrowers struggling with monthly payments might explore extending their mortgage term. For example, 

Taking a 20-year mortgage to a 35-year mortgage reduces your monthly payments from £1,259 per month to £938 per month.

(Based on a Furness Building Society 4.59% tracker on a typical £200,000 mortgage with a house worth £300,000)

While this option reduces your monthly costs, it should be approached cautiously, as it results in higher overall interest payments over the long term.

For those considering remortgaging in six months, it is advisable to capitalise on the flexibility of mortgage offers, which can typically be held for six months. 

This allows North East homeowners to secure a rate without committing prematurely, enabling them to take advantage of potential market improvements. Furthermore, borrowers approaching the end of a fixed deal might consider making regular overpayments to reduce the loan size and familiarise themselves with higher monthly payments. However, North East borrowers should be mindful of any overpayment limitations set by their lenders to avoid incurring additional charges.

Homeowners with fixed deals set to expire in the coming years should prepare for potential rate increases. While interest rates are projected to decrease by 2025, securing a new deal at the same favourable rate may prove challenging. Thus, it is wise to start budgeting for future mortgage cost increases and explore strategies to mitigate the impact.

In terms of how it affects North East house prices, this is the 13th rise in as many months. Only last week, 24,201 homes sold STC, with a running weekly average is 22,289 house sales.

Let us remember interest rates reached as high as 15% in 1992; the current rates remain historically low.

Despite alarming predictions of a house price crash, the situation is far from past crises. Home repossessions and harmful equity levels are not a significant threat, and house prices nationally have risen by approximately 20% since 2020. 

Additionally, wage growth outpaces the slight increase in mortgage costs for those not on fixed-rate deals.

It is crucial to put things into perspective. Reports about higher mortgage expenses fail to acknowledge that mortgage applications since 2014 have been stress-tested at an interest rate of 5%, ensuring borrowers' affordability. 

The property market's resilience and homeowners' ability to adapt to changing circumstances remain intact.

In conclusion, the recent rise in mortgage rates has raised concerns among North East homeowners, especially those in remortgaging or seeking new deals. 

By taking proactive measures such as consulting mortgage brokers, considering equity increases, exploring extended mortgage terms cautiously, and planning for future rate hikes, North East homeowners can navigate this evolving landscape and minimise the impact on their finances. 

Being informed, prepared, and proactive will empower homeowners to make the best decisions for their mortgage needs in these challenging times.