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What To Do About Increased Interest Rates And Mortgages?

Following the anticipated interest rate rise to 0.25%, market specialists at 1newhomes gather and discuss tips on what to do about the increased rates.

The Bank of England has finally announced a 0.15% rise to the interest rate from 0.1% to 0.25% last Friday. The main reason behind this is perhaps high and rising inflation in the UK economy.

Finance experts at Trussle estimated an additional £324 to the average annual mortgage. Mainly, it is because many have Standard Variable Rates (SVR) Mortgages, which will increase according to the interest rates. To support new homebuyers, specialists shared mortgage tips given the increased interest rates.

Tip 1 – Consider a Remortgage

Usually, you can remortgage six months before your deal ends, and current settings might indicate a more favourable time to remortgage now than later.

Previous studies revealed annual savings of £3,500 for those who remortgaged, which accounts for 15% of the average annual income in the UK. Note that some clients may need to pay early repayment charges.

Tip 2 – Consider Green Mortgages

Green mortgages allow more favourable conditions for those with energy-efficient homes. Find out the status of your property or the new homes you want to buy – A or B of the energy performance certificate (EPC).

Typically, green mortgages offer lower rates, cashback, or extra borrowings at lowered rates. For instance, NatWest offers lower rates on 2-year and 5-year fixed-rate mortgages, in addition to the cashback.

Tip 3 – Learn About Part And Part Mortgages

This type of mortgage suits people who do not have a steady income all the time. For example, a person relies on bonuses or commissions and needs lower monthly mortgage payments.

Part And Part Mortgages divide the loan into repayment and interest only. Brokers can fit such mortgages to suit personal needs, confirming an overpayment clause, which allows you to pay more when you have extra funds.

Tip 4 – Consider Overpayments

Current settings might be favourable to start overpaying for the mortgages every month, or at least occasionally. However, be sure to check the regulations as many mortgages allow to overpay no more than 10% per year.

The amount of savings because of overpayment might be dramatic – an extra £50 per month can drop around 2 years off your mortgage and save more than £5,000.

Tip 5 – Study Offset Mortgages

Offset mortgages link your savings account to the mortgage. It means that lenders treat savings as mortgage repayments.

You can still use the savings, but it will affect the interest you need to pay. To use an offset mortgage, a buyer needs to have savings and a mortgage with the same provider.

Tip 6 – Save Up Bigger Deposits

Particularly for first-time buyers (FTBs), saving more to make a bigger initial down payment (deposit) is highly beneficial. It simply means lower mortgage interest rates and increased chances for approval.

New buyers today learn how to save money to put down a bigger deposit. Additionally, FTBs savings for the deposit often mean seeking help from the family, which is only normal. Researches show that around 40% of buyers today need family support to fund their first property purchase.

Ideally, a 20% deposit is a decent starting point, while 25% bring even more favourable rates.


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