Buying your first home amid today’s turbulent market might feel like a daunting task as mortgage rates continue to rise and fall. Should you wait until the market stabilises? Is it worth renting? Are mortgage rates falling right now?
If you decide to take the plunge into homeownership, then comes the ‘should I commit to a fixed-rate mortgage for five years and risk watching the rate drop further during that time?’ or opt for a two-year term and hope that they stay as favourable as we’re hearing.
These are all very valid questions and concerns that might be swirling through your mind if you’re thinking about buying your first – or even your second, third, or fourth home. And you aren’t alone – 51% of Brits are more worried about their mortgage than anything else, according to experts at Citizen Advice and the Money Advice Trust in an article published in the Office for National Statistics.
The ever-changing landscape of interest rates can make decision-making more challenging. Many of us dream of buying a home for the first time, but sometimes it feels like it will all stay a dream in the realm of a cost of living crisis and rocky mortgage rates.
Join us as we unravel the complexities and offer our advice to help you confidently stride towards your first home. We’ll explore how to tackle the unpredictability of mortgage rates and provide actionable advice for those hoping to climb onto the property ladder!
The burning question when buying your first home: Are mortgage rates coming down?
The speed of mortgage rate changes feels overwhelming. The truth is, nobody knows what will happen.
Mortgage costs first rocketed a year ago after former Prime Minister Liz Truss’ mini-budget, triggering market uncertainty and sending the pound crashing to historic lows. Mortgage lenders in turn pulled their deals and during the spring of 2023, there was a flurry of rates climbing relentlessly, putting homebuyer’s monthly repayment costs up to the highest it has been in a decade.
You may have recently heard that mortgage rates are falling, again, which is fantastic news if you’re thinking about stepping onto the property ladder. With the volatile landscape of the housing markets, where mortgage rates seem to be on a rollercoaster ride, it can be challenging to stay informed. Though it might feel confusing, there are proactive steps you can take to navigate through the uncertainties. Read on for our advice.
Tips to support you in buying your first home with today’s mortgage rates
If you’re buying your first home – maybe in Oakley Vale? – sudden spikes in mortgage rates can throw your budget out of the window, impact your choice of home, and add an extra layer of stress to an already nerve-wracking process. Alas – you’ve made it to our top tips on buying your first time despite all odds…
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Consult a Mortgage Advisor/Broker
Probably THE best advice we can give. There are lots of experts out there, who will help you understand your financial situation, guide you through the mortgage process, and recommend the most competitive rate to suit your circumstances.
Even better, they continuously monitor rates, ensuring you get the best deal right until completion, even amid this volatile market. They can make the process effortless, saving you from the paperwork and hassle. Though they do typically charge a fee, it may be worth it for peace of mind!
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Create a realistic budget
Sit down and list every future expense. This includes not only your potential mortgage payments but also those monthly outgoings such as water bills, electricity, commuting, petrol, groceries and so on. Depending on the mortgage product you choose you will need to account for any fees, and insurances needed to take out and support your mortgage.
Once you’ve gathered this data, compare your monthly expenses to your income and see how potential mortgage repayments fit into the equation. A realistic budget will help you narrow down your home options and give you confidence in your decision. It ensures you’re in control of your financial journey toward homeownership.
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Stay informed
Keep a close eye on the housing market and mortgage rate trends. Though we sadly don’t have a crystal ball and will never 100% know what will happen, it’s wise to do your research to help make informed decisions about whether this is the right time for you and what type of mortgage to choose.
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Locking in Rates
Before you dive into the world of mortgages, it’s essential to understand the pros and cons of a fixed-rate and adjustable-rate mortgage (ARMS).
- Fixed-rate mortgages offer stability and predictability, as your interest rate remains constant throughout the loan term. However, it’s worth noting that these steady rates often come at a higher cost. If interest rates fall, you may be locked into paying a higher rate until your fixed rate expires. Conversely, locking into a fixed rate can protect you against sustained interest rate rises, so you will need to decide (with advice) whether it is in your best interests to fix the rate for certainty or remain flexible as below…
- On the flip side, adjustable-rate mortgages might seem appealing due to their initial lower rates. Be aware, though, as those low rates don’t last forever. All good things come to an end, and your payments could surge when the rate adjusts.
So, when choosing between the two, consider your risk tolerance and how market fluctuations will have an impact!
Now, as if that’s not enough, next comes the rigmarole of deciding between two years, three years or five years if you opt for a fixed-term mortgage.
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Two-year, three-year, or five-year?
If you’re after a shorter-term option, the two-year term is your best bet. However, it’s important to consider where you’ll be in your life when the term ends. Be prepared for the possibility that rates may have changed by then.
A three-year term offers a balance between short-term flexibility and a bit of stability, whilst five-year terms give you the security of a fixed rate for a longer period. Last week, the longer term option might have seemed counterintuitive but with current conversations of falling rates, it could be a strategic move to lock in a better rate for an extended duration, dependent on your circumstances.
This is where our first tip – Consult a Mortgage Advisor/Broker – comes in. They can help you to weigh your individual circumstances and navigate the maze so that you make an informed choice that aligns with your goals.
Homeownership is an exciting adventure, and with the right guidance, you can make sure it’s fun and not frustrating!
If you’re looking to buy, Oakley Vale has second-hand homes available which you can explore via our Houses for Sale page. And a new phase of development is coming forward bringing new builds, a school and local centre.
