During the recent pro-longed period of rising interest rates, mortgage applicants have faced increased difficulties.
Higher interest rates mean higher monthly mortgage payments, which can strain borrowers’ budgets and affordability.
As rates rise, lenders also tighten their lending criteria, making it more challenging for applicants to meet the requirements for loan approval.
Some of the brokers who MCG Investments work with have reported recently that lenders have been pulling products and rates at very short notice.
Rising rates can lead to a decrease in home affordability, reducing the purchasing power of potential buyers.
Overall, the current conditions make it more challenging for mortgage applicants to secure loans and find affordable housing options.
But people should not panic and we would encourage all homeowners to speak with an independent mortgage broker to consider all their options, e.g they may be able to increase their mortgage term to help bring down the monthly payments which they can then reduce in a year or two again when either interest rates have started to decrease or their monthly disposable income increases.
In relation to property investing the above challenges are equally relevant and the current climate of rising rates, only strengthens the need for those investing in property to be very clear on their numbers when structuring deals. They should ensure they have incorporated enough “head-room” to cover rising rates and higher monthly mortgage payments.
Investors should avoid using personal funds to support any shortfall between mortgage payments and rental income, as this might repeat mistakes made back in 2008 which we all should avoid.
The UK Government will now need to consider support measures to support lenders and home owners to avoid defaults and repossessions as the stubborn rate of inflation continues to be tackled by BOE raising the base rate.
