The temperature may be plummeting, but interest rates on mortgages are one thing likely to be heading upwards this autumn, as the UK prepares for the Bank of England to increase interest rates for the first time in more than 10 years.
If you’re planning on taking out a mortgage sometime soon, this news is unlikely to be music to your ears. However, if you can act fast, you might be able to join many Brits who have managed to beat the hikes.
Chasing low interest rates
New figures from the trade association UK Finance showed that in August, mortgage lending in the UK increased, despite predictions of a summer drop off. In fact, gross mortgage lending hit £24.2 billion – up £1.2 billion on July.
And what’s caused the rise? John Goodall, chief executive of buy-to-let specialist Landbay, told The Telegraph that he believes it’s a result of people trying to remortgage or buy their first home before the interest rate rises kick in.
This would make sense, given that in general, the housing market is beginning to slow: Average house prices are declining and annual growth in consumer credit is dropping, making the unexpected August uptick in lending all the more surprising and likely the result of an upcoming change.
Getting in under the wire
If you’re planning on buying a house or remortgaging, you may feel like you’re dealing with a ticking timebomb as autumn nears. However, if you can apply for a mortgage before interest rate hikes, there are a few things you can do to increase your chances of being approved in time.
- Get your credit report and score up to scratch– lenders will run a credit check against you as part of their decision process so they can see your history of managing credit and your existing credit commitments. If your report has errors and/or your score isn’t as good as it could be, your risk of being rejected could be high, especially if you’re applying for some of the best market rates. To learn more about how your credit report and score affect the mortgage process and what you can do to put yourself in the best possible position, click here.
- Make sure your money is in order – affordability plays a huge part in a lender’s decision process. Your income and the likelihood of this remaining stable, any dependencies you have, general outgoings, savings and investment contributions and lifestyle costs are all taken into account. The more in order your finances are, the easier it is for a mortgage advisor to see that you can afford the mortgage you’ve applied for. What’s more, if everything is already prepared before you make the application, it can help to make the process go quicker.
- Save up as much as you can – The bigger your deposit, the smaller your mortgage repayments will be, which may help to improve your affordability in the eyes of lenders.