This is something that we find ourselves being asked regularly by both homeowners and potential home buyers in Hull. The answer to this question depends on entirely on what sort of market we are in and how it is performing.
In order to stay more up-to-date with the mortgage market, including hot topics such as mortgage interest rates and government schemes, take a look at “Mortgage Market Update” playlist on YouTube. We regularly post these types of videos to ensure that all of our customers are “in-the-know”.
What are mortgage rates?
Mortgage rates are the level of interest that a mortgage lender will be charging you on your mortgage balance. This will determine the cost of your monthly mortgage payments, as you are paying, generally, a combination of interest and capital. Lower mortgage rates typically means lower payments.
How are mortgage rates determined?
There are a lot of different factors that can affect what your mortgage rates will be. One that you can absolutely have control over, is any personal factors that will determine if you qualify for a mortgage.
This will include things like your credit score or deposit. The lower the risk, generally, the better the rates. An open & honest mortgage broker in Hull will be able to take a look at your situation, helping you to find the best mortgage deal that is available to you, for what it is you are hoping to achieve.
Our dedicated mortgage advisors in Hull have the ability to search through 1000s of deals, including many different specialist mortgage deals, for customers who perhaps have more complex cases.
What it all comes down to really, at the end of the day, is the current market position, the state of the economy and the base rate of the Bank of England. If the economy is performing well, there will typically be a higher demand for both goods and services, which includes properties.
Higher demand will also usually mean that the Bank of England base rate will go up too, which sees mortgage rates following. The mortgage rates set by mortgage lenders are usually set at a percentage above what the Bank of England base rate is.
Whilst a stronger economy could mean that home buyers can afford more, mortgage lenders aren’t made of money. Because of this, when the base rate is up, the cost of borrowing for mortgage lenders will also rise, which also brings up mortgage rates to cover their borrowing costs.
When the economy isn’t necessarily doing so well, this works conversely to how we mentioned above, as consumers will not be able to afford as much. Because of this, you will typically see interest rates coming down as a why to encourage people on the property ladder with potentially lower payments.
Mortgage Rates Affected by Inflation
As discussed above, one of the biggest factors for changes in mortgage rates, is changes to the Bank of England base rate. As a general rule, mortgage lenders will set their interest rates at a percentage above this. This means that depending on the base rate, this could fluctuate.
Something else that can have an effect on the Bank of England base rate, however, is any changes to inflation. The government ideally have a target in mind that they need to keep at, in order for the cost of living to remain affordable. Unfortunately, this has been known to go over the target.
In situation such as these, you may see the cost of living increase, though unlike the example of a strong economy meaning people may be able to afford more, this can be quite the negative and seeing people unable to afford as much as they would have done.
This of course isn’t exactly the best news for those with ending fixed-rates, as it means they may struggle to afford price increases that are set to take effect once their initial period has ended. In cases like this, a mortgage advisor in Hull can be incredibly beneficial.
Fixed-Rate Mortgages vs Tracker Mortgages
The Bank of England base rate tends to have fluctuations anyway, although usually only very slightly. Tracker mortgages are a type of mortgage that will be following along with this base rate, sitting at a percentage above and moving as and when the base rate moves.
When the base rate is a little low, this can work out quite well, as your monthly mortgage payments will be lower. Unfortunately, if mortgage rates were to go up, you would also be paying more on your monthly mortgage payments, which can change fairly quickly.
An option that could be better for this, which is actually one of the most popular mortgage types you could choose from, is a fixed-rate mortgage. These allow you to lock-in to the interest rate at the time, keeping your payments the same for a set period.
These time periods tend to be between 2-5 years, though they don’t necessarily have to be. An example would be, if your interest rate was 4% and you were fixed-in for 5 years, you might see rates rise to 6% during that time, yet still be paying 4% until that 5 years is up, saving you money.
In times where the economy is a little uncertain, a fixed-rate can provide certainty and stability, giving homeowners one less thing to stress about at home. The downside is that if rates have indeed gone up during this time, when your fixed-period ends, you will move onto a higher rate anyway.
This sort of thing occurring can actually lead some homeowners to remortgage quite early, even being willing to fork out for an early repayment charge, in order to fix in for a longer period and protect themselves from future interest rate increases that could be on the horizon.
How long should I fix my mortgage for?
This really boils down to predictions, how do you see the interest rates changing, as well as your own personal situation changing. As said before, personal factors also can impact mortgage rates, so having a higher deposit will potentially open you up to much lower rates anyway.
If you find that you are in that situation, taking out a fixed-rate mortgage could be beneficial, to stick to those interest rates you have given yourself access to. So long as the economy performs well also, fixing in for 2, 5, maybe even 10 years could see you reaping the benefits of those rates.
Of course this entirely depends on circumstance, and 10 years is a long time to wait. During that time period, you could even see interest rates drop lower than you first fixed in for, meaning you are paying more per month than you could’ve been, if you’d only fixed in for say 2 years.
A trusted and experienced mortgage broker in Hull will be able to best help you prepare for your mortgage future, as well as help you make any decisions based on your plans. They will use their knowledge to help you every step of the way.
Speak With a Qualified Mortgage Advisor in Hull
Interest rates can change without warning really, depending on the current state of the economy, the market and also, the Bank of England base rate. Match it up with your personal circumstances, and there can be much uncertainty.
By booking yourself in for free remortgage advice in Hull towards the end of your fixed-period, or first time buyer mortgage advice in Hull if this is a new experience for you, you can benefit from experts in the field helping you to find the best mortgage deal, with the most favourable mortgage rates.
Date Last Edited: 12/06/2023
