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Chapter 1: What has changed in the mortgage landscape recently?
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Chapter 2: How have mortgage rates been affected by recent global events?
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Chapter 3: What should first-time buyers consider when choosing a mortgage?
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Chapter 4: Is now a good time to buy a house?
Right, on to this week's show. Welcome to Merrin Talks Your Money, the personal finance edition of Merrin Talks Money. In these bonus podcasts, we talk about the best strategies for making the most of your money. I am Merrin Somerset Webb, and with me, as ever, senior reporter and Money Distilled author, John Stepak. Hi, John.
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Right, we are on to one of our favourite topics. Well, really, house prices is our favourite topic, but we're actually going to revisit mortgages, which is connected to our favourite topic and, of course, dear to all of our hearts. For those of you who are new to the show, last spring we published an eight-part series on how to buy a house in the UK, which I strongly recommend, by the way.
But since then, the landscape of interest rates in particular has changed drastically.
Chapter 5: What strategies can help save money when remortgaging?
So we thought it was worth revisiting this topic and looking at questions like what is the best type to get now? Who has the best rates? What's most important when trying to choose the best mortgage for you? And of course, also, is now really the best time to buy a house at all? To help us with that, we welcome back to the show, Anthony Emerson, director at Trinity Financial. Hello, Anthony.
Hi, Meryn. How are you?
Good, thank you. And thank you for joining us again.
Chapter 6: How can borrowers prepare for potential interest rate changes?
We really appreciate it. Now, you've already heard me say the questions I'm going to ask you. So why don't we just start? The landscape has changed a lot since we last saw you, last spoke to you. Do you want to run us through what's been happening?
The landscape has changed dramatically. I mean, last time we spoke, we were on a journey where we were expecting one, maybe two Bank of England base rate cuts. The inflation looked like it was a little bit more in control. And then
it's flipped entirely on its head and we are now in a position where the iran war has created an immediate surge in the interest rates that are available to clients we saw within a two week period an increase of around about 1.2 percent in the cost of borrowing which is exactly the opposite of what we were hoping for
Chapter 7: What are the pros and cons of fixed-rate versus tracker mortgages?
Yeah, 1.2 percentage points. So up from, what was the sort of classic two-year fix before the war began?
The lowest rates are available at the point where the war started was around about 3.6 and then that jumped up to 4.7 as the sort of best rate option that was available. And that was where a stonkingly high 40% deposit.
Wow. If we went out today with, say, a classic 10% deposit looking for a two-year fix, what would we end up paying?
At the moment, just short of 5%. And that, I mean, the interest rates went up by sort of 1.2, where everything was in excess of 5%. But since then, we've seen a little bit of a softening as the swap rates have edged downwards a little bit. And I think the uncertainty caused lenders to over...
Chapter 8: What should buyers keep in mind regarding setup fees for mortgages?
compensate for the uncertainty. And then as things have sort of panned out and they've got more of an idea of how it's going to affect, we've had the rates come down a little bit, around about sort of 0.2 of a percent. So we're still that 1% higher. The lenders, bless them, are doing absolutely everything they can to try and get us into the properties that we want.
I mean, we've seen more and more lenders these days change their affordability calculations. So we've now got more lenders lending five and a half times your income, even up to six times your income for certain people. And we have really reached that inflection point still where
that whole debate about rental versus owning on a month to month cost basis is if you're young and you've got a deposit, it probably makes sense for you still to buy a house than it is for you to rent.
Really?
It does, yeah.
It's not getting a little closer with these prices? I mean, I always think when you see a lender prepared to offer six times income in a dodgy economy with very low growth in real wages, particularly in the private sector, it makes me feel nervous that maybe they've relaxed those affordability measures a little too much.
I can totally see where you're coming from on that, but the problem is the Renters Reform Act has also kicked in now, which is meaning that we've got more and more landlords leaving the sector. And that means that we're going to have less rental properties available, which is going to drive the prices up.
It's going to have completely the opposite sort of effect that maybe the government wanted, but it is definitely going to mean that renting is going to get more and more expensive as we move forward.
Interesting. So you'd expect buying to become more affordable, prices to come down. And we've seen certainly a collapse in house price growth. And we're seeing falls in absolute nominal terms in quite a lot of areas now, particularly in London. And you'd expect that to continue partly as a result of this rental reform.
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