With constant increases in the Bank of England base rate, mortgage rates have been hitting the headlines with regularity.
While rates have risen, housing market sentiment has fallen. A record half (52 per cent) of adults across Britain disagreed it was a good time to buy a property, according to a September survey by the Building Societies Association.
So where does this leave first-time buyers, and those looking to remortgage?
Mark Harris, chief executive of SPF Private Clients, says that for first-time buyers it is arguably as good a time as any to buy, if they have found a home they want to purchase, are happy with the price they are paying, can afford to pay it and are prepared to stay put for a few years.
“Buyers will be aware that there is talk of property prices falling and potential negative equity for first-time buyers in particular because they tend to take on higher loan-to-value mortgages.
“But such issues are only really a problem if the buyer intends to sell again in the short term. Over time, prices tend to appreciate in value and usually recover even if they dip initially.”
Richard Howes, director of mortgages at Paradigm Mortgage Services, says first-time buyers could take advantage of any fall in house prices, but adds: “It’s the issue of affordability coupled with the cost of living increases that could really impinge on their ability to buy.”
With falling house prices widely predicted across the market, Simon Gammon, managing partner of Knight Frank Finance, says it is reasonable to expect lenders to be hesitant about offering competitive high LTV mortgages.
“We have already seen a reduction in the number of 90 per cent and 95 per cent mortgages available, and those that are still available come at a significant premium in terms of rate. We can therefore expect it to be harder for first-time buyers to get onto the property ladder in the foreseeable future.”
Just Mortgages national director Carl Parker says it is without doubt becoming more challenging for both first-time buyers and those looking to remortgage after a low fixed rate.
“This is just because rates have risen so quickly, making it hard for people to adjust. However, swap rates are starting to fall back and therefore mortgage rates are dropping a little too. However, they are unlikely to ever return to the historic lows of the past 10 years.”
Vikki Jefferies, proposition director at Primis Mortgage Network, also points to fixed rates stabilising despite the 0.75 percentage point increase in bank rate. But she agrees that borrowers reaching the end of a fixed rate will be faced with higher rates than they are used to.
“This may come as quite a shock for some, especially with house prices falling and reductions in loan-to-value ratios. As a result, product transfer could prove to be a better option for some as customer loyalty can be considered, which sometimes includes preferential rates.