The state of the mortgage market and concern about property prices have left much of the population feeling nervous, with new products such as HSBCs Rate Matcher mortgage product being hailed as a lifeline for struggling households.
Thousands of us are said to be facing negative equity or be left struggling to find a new mortgage but when times are tough and there’s so much speculation it’s important to keep a cool head and look at this situation as things really are.
It’s important to remember that if you’ve being paying off your mortgage for a number of years then you should have built up a sizeable share of equity in your property. This means that you own a sizable chunk of it outright.
The more you own the less of a risk you represent to lenders concerned about peoples ability to make repayments and you shouldn’t struggle to get a new mortgage if you’re coming to the end of a fixed deal.
If you are one of the borrowers with a significant share of equity in your property then while you should be able to find a new mortgage without any problems you may have to pay for a slightly higher rate and pay a little more in fees. The rates on the most competitive two and three year fixed rate deals are up 0.28 and 0.20 per cent respectively over the past year.
While this will add a small sum to your monthly mortgage payments this should be manageable with careful budgeting. Rates are also still comparatively low to years gone by. In 1991 for example the Bank of England’s basic rate of borrowing was set at 10.38%, so things could be worse!
116,000 on the market
This said, the FSA estimates 1.4 million people will come to the end of cheap fixed rate mortgage deal arranged in 2003 when interest rates were as low as three or four per cent. If you do fall into this category then there a few things you can do to ensure that you get the best deal going forward.
Find out when you’re current deal is due to expire and contact your mortgage lender to see what they prepared to offer you. If the rates you’re quoted sound uncompetitive then start looking elsewhere. It’s worth remembering that in many cases smaller lenders may have more competitive deals than the big high street banks.
We’re all going on a mortgage holiday
When you’re picking your next deal it could be worth choosing a lender which offers mortgage holidays. According to MoneyExpert data almost 60% of fixed, discounted and variable deals come with the option of a mortgage holiday meaning that if the payments are becoming a real strain then you can simply take a month off paying without incurring a charge.
Ride out the storm
After an extended period of rising house prices and low interest rates many of us have forgotten that buying a property does involve a certain amount of risk and it can be a significant financial strain. Having said this so long as you stayed informed about developments in the mortgage market and plan your remortgaging well in advance then you should be able to minimise the financial strain.