Interest rate rises: How to keep your sale or remortgaging plans on track
With the recently announced 0.75% interest rate rise we look at what you can do if you decide to stay in your current home or are thinking about moving.
Even though many lenders lowered their mortgage rates after Rishi Sunak became Prime Minister, we all face a bumpy road ahead.
The media is battling it out to write the scariest headlines of an imminent price crash and soaring interest rates, but there isn’t a newspaper, market analyst or financial expert who knows the future of the property market.
Nonetheless, many homeowners will be affected by rising interest rates. If you’re planning to remortgage within the next year or so, you’re likely to pay a higher rate than you do now. And if you’re looking to sell, you might feel like you’ve missed the boat to move.
Fortunately, it’s not all bad news. The Bank of England intimated last week that interest rates might peak lower than market speculation, followed by several high-street lenders cutting their rates. So much for all those predictions!
Still, there's plenty of uncertainty and nervousness right now. So whether you’re remortgaging your home, looking to sell or even if your buyer's mortgage offer has expired, this week’s blog is all about keeping your plans together.
STAYING WHERE YOU ARE
You don't have to move home to be affected by rising interest rates. If you’re one of the 1.8 million homeowners due to come off an existing fixed rate in the next 12 months, your remortgage will almost certainly be at a higher rate than you have now.
Although there’s no escaping increased borrowing costs, there are some things you can do now to minimise how much extra you have to pay, including:
● overpay your current mortgage (most lenders allow 10% of the balance per year) to reduce the amount you need to remortgage for and get the best loan-to-value rates
● put additional money aside in a savings account (rates are better than they've been for years) to overpay even more at the next opportunity
● check whether you're better off ditching your current mortgage now (even with an early repayment charge) or reserving a new deal in advance before further rate rises.
Speak to a financial adviser with access to the entire mortgage market to find out who’s got the best deal for you. You can also download a brilliant 62-page guide to remortgaging from the Money Saving Expert website.
IF YOU’RE THINKING OF SELLING
Are you wondering if the moment has passed to sell your home for the best price? Or whether you’ll find a buyer at all, given the current turmoil in the mortgage market? Many sellers we meet have the same concerns, but here’s why all is very far from lost:
● It may not be quite as strong a sellers’ market, but if you’re selling and buying, the cash gap between your sale price and purchase price could shrink as the market shifts.
● There is still a shortage of available property which is underpinning prices - in fact, Rightmove’s October report shows a very slight increase.
● Long-term considerations around schools, work, space, family and lifestyle usually outweigh the ups and downs of the property market.
In short, people’s lives continuously move on regardless of interest rates and market conditions. So with a good agent on your side who promotes your home beautifully and proactively – someone like us, for instance! – you can certainly sell.
IF YOU’RE ON THE MARKET
Conveyancing logjams are affecting thousands of moves right now because of so many sales this year, meaning there’s a higher risk of mortgage offers expiring before sales complete.
So if your home is already on the market, focus on removing every potential legal delay with our five-point checklist:
● Instruct your conveyancer now and get all your paperwork together to speed up the legal work, including deeds, guarantees and property information forms.
● Review progress now with your agent to ensure your home’s asking price reflects current sales in the property market in your area.
● Stand out from the crowd with the tips in our Love At First Sight article to make your home irresistible online and on viewings.
● Be flexible with buyers who are either cash or getting a smaller loan-to-value mortgage, as they’re less affected by interest rate jumps.
● Ask your agent to impress upon your viewers the importance of securing a mortgage offer with a six-month expiry date to keep it valid until the end of the legal process.
Finally, if you feel your current agent has run out of steam, it could be time for a new approach. In which case, our blog on changing estate agents everything you need to breathe new life into your move.
IF YOU’RE ALREADY UNDER OFFER
Many sellers are worried about their move collapsing because of buyers getting jittery, or their mortgage offer expiring. Here’s where it’s essential to work together with your agent and conveyancer to maintain momentum and stay ahead of hiccups in the chain.
● Ask your agent to check in with your buyer about their mortgage offer's expiry date and gauge their enthusiasm and commitment.
● Talk to your conveyancer to find and fix any outstanding enquiries on your sale or purchase.
● Check up and down the chain to see if any sales have hit a legal roadblock and whether you can do anything to get things going again.
● Find out if any mortgage offer is likely to run out before the legal process is complete and whether any buyer should act now to secure a new deal before rates rise again.
● Make sure your buyer doesn’t take out any more credit yet (whether it’s furniture, gadgets or a holiday) in case their mortgage offer does expire, and they need to reapply with a new lender.
Plenty of people are still successfully moving home, but it’s a matter of staying on the case to pick up potential problems early and solve them fast.
IF YOUR BUYER’S MORTGAGE OFFER EXPIRES
All mortgage offers have an expiry date, and the days of lenders simply offering to extend the same deal are behind us for now. If your buyer’s mortgage offer expires before your sale completes, it could affect their ability or desire to proceed if the new rate is significantly higher.
So what can you do if this happens to your sale?
● Check whether your buyer can still proceed or if you need to get your home back on the market.
● Encourage your buyer to speak to their existing lender first about switching products, as it’s usually faster than re-applying through a new bank or building society.
● Could your buyer lower their costs in the short term by taking out a longer-term loan or interest-only mortgage now, then remortgaging later on?
● If your buyer can’t afford your home at a higher interest rate, would keeping them at a lower sale price be a better option for you than starting again?
● If you do renegotiate your sale price, can you share some or all of the hit among sellers further up the chain?
As you can see, just because your buyer’s mortgage offer expires doesn’t mean your sale has to collapse. With some creative thinking, straight talking and an open mind, you can keep your move on track and start the next chapter of your life.
What’s your next step?
Rising interest rates are affecting everyone, so if you’d like to talk about the value of your home or how you can maximise your chances of moving, why not get in touch? We’d love to answer your questions and hear about your plans.
Give your local office a call on 01525 713111, 01582 882440 or 01767 669222 or email me at Stuart@lovehomes.uk – I’m here to help you make the best decision for you, whether that’s selling up or staying put.