“There’s no doubt the mortgage market has been a bit of a roller coaster over the last few years; we’ve gone from record low interest rates, through 14 Bank of England Base Rate increases, to much higher rates. Lately, we’ve seen mortgage interest rates start to reduce, to the relief of many borrowers.”*
With interest rates fluctuating, Carlisle mortgage manager Jack Green explains that there are a number of factors to consider when choosing the mortgage which is best for you.
“Higher borrowing costs have an impact on how much you can borrow. When interest rates are higher, based on your affordability, you are likely to be able to borrow less, as your monthly payments will already be pushed up due to you paying more interest.
"When you apply for a mortgage the lender will do an affordability check. They’ll look at your income and outgoings to decide if you can afford your mortgage payment both now, and also if interest rates were to rise.
“People being able to borrow less can influence house prices. And we’ve started to see this in action, with prices in some areas of the country slowing and in some cases reducing. Here in Cumbria, as happened with previous peaks and troughs in the housing market, we tend not to see the huge increases that can happen in places like London and the South East, but we also normally avoid the big drops too.
“As the names suggest fixed rate mortgages offer a set rate of interest for a specific period of time, while variable rates can change depending on a number of factors,” says Jack.
“The biggest consideration for people who choose to take on a fixed rate mortgage is probably peace of mind. It is easier to budget and you know in advance what your mortgage outgoings are going to be every month.
“One thing to bear in mind with a fixed rate is that if interest rates go down, you wouldn’t see the benefit. To take advantage of interest rates going down, you’d need a variable rate mortgage (sometimes known as a discount or tracker).”
Jack explains the ups and downs in a little more detail.
"So, for example, a two-year fixed rate is normally more expensive** - ie. it's at a higher rate and higher payment - than a two-year variable rate would be, but offers the protection of knowing what your payments will remain the same for a set period of time.
“Variable rate mortgages are generally a little bit cheaper and if rates come down your mortgage payment will come down too, but on the other hand if rates do go back up your mortgage payment might go up as well.”
Jack says the key thing is to get good advice on the best mortgage for you so you are ready to move quickly when you want to buy a home.
“Speed is of the essence in the housing market at present, so it’s vital to have your mortgage agreed in principle,” says Jack. "That's where The Cumberland comes in. We can guide you through all the different options that we have available and find out what’s important to you. Then where possible, we’ll recommend the best mortgage from our range, based on your circumstances.”
You can find out more about The Cumberland’s current mortgage options here.
One person who purchased a property after getting mortgage advice from The Cumberland was Jemima, an interior designer who was able to buy her first flat after talking with a mortgage adviser.
Jemima said: “The service was really good. What I liked was that it wasn't just mortgage chat. She would ask me more personal stuff, like we talked about IKEA and gardening. It wasn't all business, there was a nice personal angle to it as well."
Rates are only one consideration when it comes to choosing the best mortgage for you. "The general rule is the bigger the deposit that you can put down (as a percentage of your property value) the lower your interest rate," says Jack.
However, depending on the value of the home you want to buy and your personal circumstances simply seeking out the lowest rate may not be the best option overall.
“If you go online and look up the cheapest rate it might not actually be the cheapest overall because it could have a big fee attached,” says Jack. “It's about weighing up the total cost of the product, rather than just always that cheapest rate.”
If you took out a 2-year deal in 2022 or a 5 year deal in 2019, your mortgage will be up for renegotiation at some point in 2024. Especially if you’re coming off a 5-year fixed, it’s likely that you’ll find your new interest rate is higher than you’ve been used to paying, and as a consequence your payment will be higher.
Our customer service team are on hand to help with your mortgage queries. They can be contacted on 01228 403141 or feel free to call into your local branch. Alternatively you can book an appointment with a dedicated mortgage adviser here.
We have a mortgage jargon page which offers helpful explanations of many terms that you may encounter when searching for a mortgage.
* This article was updated in November 2023 and discusses the mortgage and housing market at that time
** This is dependent on changes in market rates and not guaranteed