As interest rates start to ease after two years of hikes, independent financial advisor, Scott, popped by to explain what this means for buyers and why many of us are finally able to take that all important step towards owning our dream home…
What exactly is the Bank of England base rate, Scott?
“The Bank of England base rate is the most important interest rate in the UK. For homebuyers, it sets out the ‘cost’ of borrowing money. It recently dropped to 5% from 5.25% which is the first time it has been lowered since the start of the pandemic in March 2020.”
So how does the base rate affect mortgages?
“The base rate directly affects mortgages because it sets the bar for the interest rate you’ll be charged. Mortgage lenders, such as banks and building societies, use it to influence the rate they charge their customers for loaning them money to buy a home.”
Why do mortgage interest rates affect the ability to buy a home?
“Because higher mortgage interest rates usually result in higher monthly mortgage repayments - the amount you’re paying back to the lender every month. This means a lower rate might mean the difference between being able to afford the mortgage you need or not, based on your income and other expenses.”
Are you seeing lenders start to lower their rates?
“Yes, lots of lenders began quickly lowering their rates when the Bank of England announced it was cutting the base rate at the start of August. We’re seeing something of a rate war as the likes of HSBC, Natwest and Nationwide announce rate reductions and new five-year fixed mortgage products.”
Does this mean it’s a good time to buy?
“It’s certainly the most affordable time to get a mortgage for the past couple of years but it’s important buyers still budget properly - not only for what a mortgage might cost them, but all the associated costs that go with it.”
What advice would you give to buyers now ready to make a move?
“Choosing the right mortgage product is key to ensure you can afford to buy the home you want, but also can afford to live in it as well. It’s very important people don’t overstretch themselves and remember to factor in things like fuel costs. This is where buying a new build home can help because energy bills are typically 57% cheaper than an older property.”
If you’re keen to take advantage of lowering interest rates and finally make your move, visit one of our homes across Greater Manchester. Our sales team will assess your buying needs and can put you in touch with an independent financial advisor who will discuss your mortgage options with you.
