03 Oct, 2023/ by Homeward Legal /Remortgage
We live in challenging financial times. Much has been said about the cost-of-living crisis and how it impacts on all areas of our lives.
It's difficult to pinpoint the precise cause of the crisis, but certainly the extended war in Ukraine, geopolitical posturing, the disastrous mini-budget of September 2022, and Russia's stranglehold on gas supplies to Europe have all played - and continue to play - their part.
The practical result of all these and more is a conflation to create a situation where household budgets are being dramatically squeezed. This is particularly acute because of the impact of domestic inflation, increasing unemployment, and the impact of the Bank of England's successive increases in the base rate, which has forced mortgage lenders to raise their rates for their products in tandem.
As those coming to the end of their comparatively generous fixed-term plans or some who are looking to buy their first property will know, the property market is quite volatile, but still expensive.
There is some good news
On 20 September, the Office for National Statistics (ONS) announced that the Inflation rate for August had dropped to 6.3%, which is still higher than is desired for economic effectiveness, but it is nevertheless moving in the right direction.
This means that it is unlikely that interest rates will go up any more, which, in turn, means that the rates at which lenders offer their mortgage products will remain reasonably stable. However, the converse is also true: interest and mortgage rates may not be going up, but they won't be coming down for the immediate future either.
Options for homebuyers and remortgages
Traditionally, mortgage terms were based on at least a 5% deposit of the value of the loan, with monthly repayments spread over 25 years. And the financial decision was based on a multiplier of the intended borrower's annual income - usually three times that amount - as well as an assessment of financial management, trading off outgoings with that income.
This means that a 21-year-old taking out a mortgage for 25 years duration would be in their mid-forties by the time the last payment was made - 20 years before their planned retirement.
Over the decades, though, the price of even the most modest properties have far outstripped the rise in wages and salaries, which means it's increasingly difficult for first-time buyers to get a foothold on the property ladder, as a 10% deposit that many lenders require on an average property is around a year's salary, which takes a long time to save up.
There are various governmental schemes for first-time buyers that are available to assist, and these are worth investigating. Your conveyancing solicitor will be able to provide guidance as they will be very aware of the details of such schemes and your ability to apply.
But, increasingly, there are the options of 30-year mortgages or 40-year mortgages to be investigated for a new buyer or someone who wants to change their current mortgage product for a different and more favourable one.
Although it might look a little bleak looking into the future of paying off a loan into your fifties, sixties or later, it is a good way of potentially reducing your monthly payments, making a house purchase more affordable, albeit over a longer period.
You'll need to assess the terms of the loan very carefully - as you would for any significant financial outlay - and it would be a good idea to talk to an expert broker for advice and guidance.
But it's an option worth exploring for more security in these uncertain financial times.
No doubt, you'll be concerned about the additional cost of the legal process that's added to the whole cost of buying a new house, or if you are swapping lenders for a better mortgage deal.
That's where Homeward Legal can really help with affordable but quality conveyancing services! They will start work on your planned purchase and/or sale as soon as you agree to the quotation and appoint them to represent you.
Homeward Legal will also provide a quote that will not change - what you are quoted is what you pay for standard conveyancing process.
There are some unforeseen items that might arise during the purchase and/or sale, but the solicitor discusses these and their cost as they come up.
In addition, to protect the homebuyer further, Homeward Legal operates a ‘no completion, no fee' promise, which ensures that, should the purchase or sale not go through as planned to completion status, no payment is required.
Call to get your conveyancing quote started, or to discuss your concerns with your plans to move.
Or you can get a quick quote, using Homeward Legal's easy-to-use quote generator.