It has recently been reported that mortgage rates are at a 20-year high, so we thought now was the perfect time for an update from an industry expert. We caught up with Mark Green of Lowen Financial Planning to talk about the mortgage market and what’s happening when it comes to the money. For those who don’t know, Mark previously worked for us at Heather & Lay so it’s always wonderful to meet with him and catch up, knowing he has experience from every angle, in agency as well as from a financial perspective. Over to Mark…
What is the mortgage market like?
It’s tricky. There is a lot of volatility in interest rates at present and things are changing very quickly, even daily. Due to the increased cost of monthly mortgage payments, due to higher interest rates, lenders are reducing the amount of money they will lend to customers. This is called responsible lending and it’s designed to make sure customers can afford the monthly repayments, which of course makes sense. The summer is generally quieter in the mortgage market, as a lot of people are hopefully getting away for some sun!
A lot of lenders have joined what is called the mortgage charter and are offering things like allowing new and existing customers to extend their mortgage term (the length of the whole loan) which help reduce the monthly payments. Interest rates have been very low for the past decade, but now there’s a bit of a correction in the market and it will have an impact on what people can borrow. In theory, that will have a knock-on effect to house prices. Locally it’s a bit different as we still have lots of cash buyers – those downsizing from London, pensioners etc, this all brings more cash into the area.
Why should people go through a broker?
We can look at the whole market which gives us access to thousands of products. A lot of people simply ask their bank for a mortgage and what they can borrow, but there are potentially lots of other options and potentially cheaper rates if they looked elsewhere. With the fast-changing market at present, banks will literally pull themselves out of the market by upping their rates to stem the flow of applications. However, a broker is always at the cutting edge of the best offers available at any time as we tend to get notification when a lender is increasing or decreasing their rates.
We understand that people may have had credit issues in the past and therefore have a bad credit score. As we have access to the whole of the market, and lenders which will only deal with brokers, we can potentially find a mortgage for people when they thought there was no hope.
We also appreciate that not everyone is paid in the same way. Some people are employed and some are self-employed or contracting. Lenders have different views on who and how they lend to different job types and therefore using an expert, we will know exactly what lenders to approach to fit the needs of someone’s own unique circumstances.
You are in quite a unique position Mark because obviously prior to Lowen, you worked for the leading estate agency in Falmouth! How is this of benefit to your customers?
This is my personal unique selling point really. I have nearly 20 years of experience dealing with property and it gives me a unique ability when it comes to mortgages but also to help my clients independently. I can assist and advise them, so they look at the right properties in the right areas and ask the right questions. I offer a support service where the customer can send me the property particulars and I will compile some questions for them to ask the agent that they might not have considered. Because of my knowledge of the property market, I can see potential pitfalls before the client instructs solicitors. For example, most brokers know about things such as mundic but don’t necessarily understand the science of mundic. I am able to consider mining, building construction etc as I have a 360-degree view of the experience of purchasing a property. IN the early years working as an estate agent, I became a trained domestic energy assessor and did over 350 EPCs during my time. This gives me a further advanced view of construction-based property. It gives me another level of knowledge and understanding. For example, I can roughly gauge the age of a property solely from the exterior architecture. I’m also the son of a builder, so building and property is in my blood. This culminates in me being able to see the whole picture when I’m working with my clients.
How much does it cost to work with you?
We provide a free one-hour consultation for all clients. In most cases, there is no upfront fee, but a flat fee of £395 (excluding VAT) is charged when the client receives their mortgage offer. However, for certain cases such as self-build mortgage applications, the fee may be higher due to the extended process of communication with the lender before funds are provided.
What kind of deals are the best currently?
We are in turbulent times at the moment and no one really knows for sure where and when interest rates may top out. There is a big debate over whether a fixed or tracker product is best at present.
The gamblers choice could be a 2-year tracker product, which tracks the Bank of England base rate. That has a chance of going down (but it also has a chance of going up!) so really it is down to the individual and their own views, as well as considering their appetite to risk.
If you wanted security a fixed rate would be my recommendation. I would probably recommend a 2 year fixed product as the best way to go, as you’d hope that in 2 years time, these customers could remortgage to a lower rate rather than sitting on a potential premium rate for a longer period of time. Interest rates are high right now but there’s an estimation that they should be lower in a couple of years, so it might be wise to fix for 2 years initially then look at fixing for longer after that. With rates potentially at a 20 year high, it doesn’t make great sense to lock in for longer than 2 years. It really is down to each individual, so it’s worth talking to a broker (like me)!
What is a good rate right now?
The interest rate usually is determined by your ‘loan to value’, which is the amount of the mortgage in comparison to the value of your house, with the lower loan to value products being cheaper.
Generally speaking, if you can get a mortgage rate with a 5 in front (as many mortgages are still in the 6% rates), that’s a good rate right now. Interest rates are steadily decreasing (at the time of our meeting) although there’s every possibility that they could increase again depending on inflation data. Hopefully the volatility will settle, and rates will come down, likely to around 3% over the medium term, but it’s all a bit crystal ball to be honest.
As a broker, we get advance notice on what is going to happen with lenders rates, but whereas before we could get 4-5 days notice before any changes, recently it’s been as little as 2 hours due to the volatile market. When that happens, I’ve got to quickly call my clients to tell them we could potentially only have hours to secure their mortgage deal. It feels wrong to put that pressure on people but due to the volatility in the market and the kneejerk reaction, we must work with what information and time frames we’ve got.
My advice is to get something secured sooner rather than later because it only takes one bit of bad news for rates to spike again. If rates drop before you complete on your mortgage, we can capitalise on this. Your bank is unlikely to tell you if you could secure a lower rate product, but your broker will keep you informed at no extra cost, keeping you updated regularly. Before your solicitor requests funds, you will have 4-5 days clearance time - we are not always informed of where the sale is (unless we are working with Heather & Lay because you have a dedicated Sales Progressor Tracey, who always updates us on where the sale is at) and time frames evolve. So, I ask my clients to give me a call with an exchange date because it gives us time to assess the rates again.
What is happening in the mortgage market and property industry from your perspective?
As indicated earlier, mortgages are more expensive than they’ve been for the past 20 years in relative terms, probably even longer than that. Rates are still not as high as the 80’s and 90’s, but we are borrowing high levels of capital and therefore the impact of interest rate rises is felt greater. Monthly mortgage payments are more than they’ve ever been, relative to people’s income. This has a knock-on effect for affordability and how much can be lent to individuals, so inevitably this is being felt by the housing market.
Though, there still seems to be a fair amount of cash around, post pandemic. It has been well reported that people saved more money than anticipated during covid and so lots of people are now using those additional savings to take some of the sting out of the cost of living crisis and the inflation squeeze in general. That’s why we haven’t seen an instant bite with rate increases. From my perspective, it feels like there’s still a hunger for new instructions, so a well-priced property seems to still be achieving around the guide price.
However, in cases where property started as a new instruction at too much money, they seem to be sitting unsold, then even when the price is reduced, buyers are looking to make offers below the new price. This market seems to be all about getting the price right at the beginning for vendors and for buyers it is about maybe considering property that has been around for a while as they might get it for a reduced price. We seem to be transitioning from a hyper sellers market through the Covid years, into a little more unpredictable market leaning towards a buyers market as a reflection of higher interest rates reducing the number of buyers with an ability to buy.
The Buy to Let market is facing a real challenge, with increased rates, a lack of tax breaks, and potential changes to EPC regulations for landlords in 2025. It is predicted that up to 15% of private landlords may leave the market in the next year. While some may see this as positive, it could lead to a housing crisis as properties are converted into second homes or holiday lets, putting pressure on tenants to find homes. This could result in rent prices spiralling out of control due to limited supply and increased demand. The government may need to step in to house these families. Landlords struggling with mortgages or considering selling in the next 6-12 months can seek advice on capital gains tax management. The increasing rental prices may push more renters towards buying property, which is seen as a more secure position.
What is your advice to anyone looking to buy this Autumn?
It depends on the buyer. If you’re already on the market, it’s all relative so don’t panic. Focus on what is affordable and what you need. If prices are up, then the property you sell will be more and however the property you then purchase will also be more. If the prices fall, then what you sell will be worth less but again what you buy will also be worth less; so it’s all relative.
For first-time buyers, the decision of when to enter the housing market can be difficult. However, historically, the market has shown an upward trend in the long run. Waiting too long may result in being priced out of the market. Therefore, if you have the means to purchase a property, it is not advisable to wait and try to predict the market. The timing of market highs and lows is often uncertain and can only be determined months after the fact. Additionally, once you have bought a property, the fluctuations in the market become less significant. Therefore, if you find a property you like and can afford, it is recommended to go for it rather than waiting for the market conditions to change.
Do you have any advice for anyone worrying that their mortgage rates might be going up?
Speak to a broker. Know your options. Don’t be a mortgage prisoner, if you can’t afford to switch lenders there are options. You don’t have to rely on your bank, a broker can see what you qualify for and there should be no upfront charges to speak to one so there’s really no risk.
Are there any concerns with securing a mortgage at the moment?
One thing I would mention is the situation with spray foam insulation. It’s all over social media being advertised currently but all comments are locked/banned so we cannot comment to warn the public. Some of the foam insulation is even government funded but what nobody is told is that mortgage lenders will not touch this as it’s causing damp and rot to the timber joists. There’s potential talk of mortgages being made available where you can add it to the mortgage cost of having it removed but typically, if you want to buy a house with foam insulation you cannot get a mortgage – it’s as simple as that. You would have to ask the vendor to remove it at their cost or you will be unable to proceed. I would highly recommend my customers ask about and look for this insulation at the viewing stage to avoid the solicitor/survey fees etc only to get caught with this issue and not be able to proceed.
What action should people take if they feel like they would like further advice?
Give me a call. My initial consultation is completely free and I am more than happy to speak about specific circumstances, as I understand everyone has their own unique story. I don’t think people have had enough information and knowledge on mortgages, especially in these volatile times. I take longer, I go into more detail and really spend the time with my clients. I want people to feel empowered and take control of their mortgage and that’s what Lowen is all about.
Thank you so much Mark for your valuable insights and expertise. For anybody interested in Lowen Financial Planning, Mark and Andrew at Lowen offer mortgages, life insurance, equity release, investments and pensions. Lowen is a proper Cornish company, Cornish name (it means happy) and both Mark and Andrew are Cornish as well. To find out more about their services, visit https://lowenfp.co.uk
