How first-time buyers could be affected by inflation and rising interest rates
Looking to climb onto the property ladder for the first time? Bad news: the cheapest deals are starting to creep up in cost. This unfortunate development can be pinned on inflation and interest rates, so understanding the current state of play in the property market is key for anyone looking to become a first-time buyer.
With this in mind, the team behind www.onlinemortgageadvisor.co.uk has broken down exactly how some first-time buyers could be affected by inflation and rising interest rates.
Rising interest rates – what’s the big deal?
Rewind to six months ago; it’s nearly Christmas, the sun goes down at about 3:30pm every day and 0.1% interest rates aren’t causing anyone any bother. It was an easier time. Since then, the Bank of England’s base rate has increased four times, rising from 0.1% to 1%.
Although the first two rises have had relatively little impact on low-deposit mortgages, the third and fourth increases both resulted in rates on 90% and 95% mortgages increasing. Also, the Bank of England has already confirmed it will increase the base rate again, with the next base rate announcement scheduled for 16th June. However, there are ever-growing concerns that this might come sooner than expected. Therefore, if you’re thinking of locking in a new mortgage, sooner might be better than later!
So, why is inflation rising?
You’d think that reaching the tail end of COVID-19 global pandemic would create an economic boom, as consumers get back on the high street and life starts moving again. Unfortunately, this hasn’t been the case; with customers flooding to the shops after being stuck inside for so long, businesses are struggling to keep up with the surging demand. This, coupled with Russia’s invasion of Ukraine jeopardising energy and food supplies, has caused prices across the board to rise.
How are first-time buyers affected?
Truthfully, there’s no one-size-fits-all answer when it comes to how first-time buyers will be affected by inflation and rising interest rates. It mostly depends on the type of mortgage you already have or are looking to get. If you’re steering towards a variable-rate mortgage, then the Bank of England’s base rate changes will affect your repayments. This is especially the case for tracker mortgages, as they’re based on the Bank of England’s base rate.
On the other hand, existing fixed-rate mortgages won’t feel the effects of any base rate changes until they’re shifted to the lender’s standard variable rate (SVR). However, the fun and games quickly stop there as SVR mortgages are very susceptible to bumping up in cost.
What should first-time buyers do?
Firstly, it’s essential first-time buyers stay up to date on inflation and rising interest rates and educate themselves on how different types of mortgages are affected by the Bank of England’s base rate changes. By doing so, you might be able to put yourself in a more favourable position when you’re trying to get on the property ladder.
Secondly, you’ll need to thoroughly research the best rates available – there are still a handful of cheaper deals out there, regardless of the size of your deposit, but bear in mind that they usually come with restrictions. The cheapest rates are undoubtedly the most tempting, but you’ll need to check the full cost of the mortgage before committing.
HICH LTD has continually raised the quality standards in the UK property survey market. Our multi-award-winning property survey service has made us the leading reference in the property survey market.
We offer property survey services of the highest quality. Using state-of-the-art equipment, we provide top-notch property surveys at affordable prices. Our prices are based on the number of rooms rather than the value of the properties, so you will always get the best value for money with our services.
Please look at our Trustpilot page and see why customers have chosen us as their favourite property survey provider!
At HICH LTD, we work to serve our clients and make the world a better place for everyone. We actively collaborate with NGOs to promote environmental, social and charitable causes. If you want to know more about our efforts or how you can help, contact us at hichinfo@aol.co.uk.
Are you looking for a roof, structural, or bespoke survey? Request it here!
Follow us on our social networks to keep updated with the most relevant property market news, tips for being a responsible homeowner, and more!
Twitter: @HICHLTD
Facebook: HICH-LTD
