Olivia Latham

Olivia Latham

Olivia Latham creates articles and press releases for property finance, auction finance, repossession, secured loans and all other finance available at UK Property Finance

People Are Choosing Longer Term Rentals, Even as 86% of Rental Households Face Financial Strain

Getting a foot on the UK’s property ladder has become borderline impossible for an entire generation of renters. Skyrocketing house prices combined with an unprecedented cost-of-living crisis have forced many to abandon their dreams of homeownership entirely.

Consequently, a study conducted by Ocasa indicates that more UK residents than ever before are viewing long-term private rentals as a viable alternative to homeownership. Affordability and flexibility were found to be the two main points of appeal among those seeking long-term rents over property purchases.

But even with the number of rental properties in the UK having increased by 1.1 million over the past 10 years, average rent costs are hovering at record highs. In fact, a full 86% of UK tenants said that rent cost increases have placed greater strain on their household expenses over the past few years.

This could be one of many reasons why tenants are actively seeking longer-term agreements with their landlords. Where possible, locking in an agreed-upon maximum rent in return for a longer-term tenancy agreement is becoming the preferred choice for many.

The alternative option is to risk regular and rapid monthly rent increases, each time a shorter tenancy agreement expires and needs to be renewed.

An escalating cost-of-living crisis

Where households are already struggling to make ends meet, utility price increases are the single biggest cause for concern. Monthly rent cost increases and fuel prices are also contributing to widespread financial instability, along with council tax bills and food prices.

Polled by Rentd, 46% of households said they were worried about further living-cost increases forecast for the remainder of the year, while almost 60% said they would likely have to make additional cutbacks over the coming months.

Speaking on behalf of Rentd, CEO and founder Ahmed Gamal highlighted how private tenants are being hit disproportionately hard by living cost increases.

“The cost-of-living crisis is particularly concerning for the nation’s tenants, many of whom would have already been struggling with the cost of renting and will now find they are being financially stretched to their limits,” said Gamal.

“During the pandemic, we saw rental values drop across a great deal of the market, but with normality returning this year, they are once again starting to climb. This means that many tenants may now be finding that the cost of renting in their given area is quickly becoming unaffordable.”

“When committing to a rental property, it’s important to consider that, much like a variable-rate mortgage payment, the cost of your rent is subject to change. So it’s vital to leave yourself some room within your monthly budget to account for this increase; otherwise, you may find yourself looking for a more affordable property or location.”

Discouraged by high upfront costs

Among those who would like to own their own homes but cannot afford to do so, the high upfront costs of purchasing a property are the biggest discouraging factor. Average UK house prices are now heading towards £300,000, meaning that the average deposit (at 15%) a buyer would need to come up with would be around £45,000.

Coupled with the rest of the initial costs associated with buying a home, the total on-hand savings needed to get the transaction underway would exceed £50,000.

The overwhelming majority of average earners in the UK simply do not have the capacity to come up with anything near this amount. All of which can be particularly disappointing for those whose monthly rent bills are significantly higher than the average monthly mortgage payment on a comparable property.

Despite being able to comfortably afford a mortgage in terms of repayments, millions are nonetheless unable to meet the basic requirements to qualify.

Even so, Jack Godby, Head of Sales and Marketing at Ocasa, was keen to point out how renting long-term need not always be seen as a last resort, worst-case scenario option.

“In the UK, popular opinion has long said that owning a home is better than renting; renting is something you do while you wait until you can afford to buy. But this isn’t the case in other countries, and it’s become less and less so here,” he said.

“People are now choosing to rent for the long term, rejecting buying altogether because of the many downsides that come with ownership, from the growing expense to the risk and inflexibility.”

“In reaction to this growing demand, rental providers are upping their game, providing high-quality homes with tenancy agreements that offer greater security and more freedom to make the property their own.”

“This is particularly true of the build-to-rent sector, which has grown phenomenally in just a few short years and looks to be one of the driving forces of change when it comes to how we choose to live.”

Wedding Loans: An Introductory Guide

Planning a memorable wedding is not for the faint-hearted. Both in terms of the logistics involved and the costs, it can be a surprisingly time-consuming and complex endeavour.

According to the latest National Wedding Survey (conducted by Hitched.co.uk), the average cost of a wedding in 2021 was £17,300. This marks a dramatic increase from the £9,100 average in 2020 and is set to continue escalating as inflation continues to skyrocket.

In general, experts recommend setting aside around £20,000 as a base figure once all expenses have been factored in.

Unfortunately, this simply isn’t the kind of money most people have lying around. Some couples save for several years to pay for their dream weddings, while others turn to family members for support. But there is a practical and flexible alternative for those who can neither save nor borrow the money they need from their loved ones.

Designed specifically for making special days as special as they can be, a wedding loan could be just the thing to make the whole thing more affordable.

What are wedding loans?

Wedding loans are typically issued in the form of unsecured personal loans, but there are also secured borrowing options available. Terms, conditions, and borrowing costs vary in accordance with how much you borrow, the length of the repayment period, and your credit status.

Depending on the lender you choose, you could be looking at a total interest payable of anything from 5% to more than 35%. The balance of the loan can be repaid over monthly instalments spanning one to 10 years, and there is no upfront payment (deposit) required.

Some banks issue standard personal loans that can be used to fund weddings, while others provide specialist wedding loans issued exclusively for this purpose. Either way, the money can be used to cover the costs of venue hire, catering, transport, attire, décor, and even the honeymoon of a lifetime.

How much money can I borrow with a wedding loan?

The amount you can borrow will be determined by your financial status and creditworthiness at the time of your application. In the case of an unsecured personal loan, the following factors will be taken into account by your lender:

  • Your credit score
  • Whether you apply individually or as a couple,
  • Your chosen lender
  • Your income and debt
  • Your general financial status

With personal loans for weddings, it is possible to borrow anything from £1,000 to around £15,000, depending on your financial circumstances at the time. For figures in excess of this, a secured loan could be a better option.

With a secured loan, there are technically no limitations to how much you can borrow. The loan is secured against assets of value (usually the home of the borrower) in the same way as a mortgage.

Secured loans are typically issued in sums of £10,000 or more and can have lower rates of interest than comparable unsecured loans. However, it is important to acknowledge the fact that your home may be at risk of repossession if you do not keep up with your monthly repayments.

When should you get a wedding loan?

Applying for a wedding loan could be the best course of action if the following apply:

  • You need the money as quickly as possible, either having decided to get married in the near future or with the date of your wedding approaching and various costs still outstanding.
  • Your credit score is up to scratch, as this is the main factor that will determine your eligibility for an unsecured personal loan.
  • You can comfortably afford the monthly repayments, having considered both your immediate and your long-term financial situation.

Before applying, consult with an independent broker to discuss your eligibility for wedding finance and the various unsecured and secured funding options available.

How to get a loan for a wedding

If you need to borrow money to pay for a wedding, there are a few steps to take before the money hits your account.

Pros and cons of wedding loans

Broker support is essential to ensuring you get a good deal on a wedding loan. Your broker will scour the market in its entirety to find you an appropriate product and will negotiate on your behalf to ensure you get the best possible deal.

In addition, your broker will ensure you are familiar with the basic pros and cons of wedding loans, which are as follows:

Pros

  • Wedding loans can be secured or unsecured. This opens the door to a variety of different types of loans for all applicants, including those with poor credit or no formal proof of income.
  • Interest rates are lower than credit cards. Interest rates on credit cards can be anything from 0% to more than 25%. With a typical short-term wedding loan, you could be looking at an interest rate of around 5%.
  • Fast-access funding is available. With specialist products like bridging loans, the money you need could be in your account and ready to use within a few working days.

Cons

  • Additional debt.  By taking out a wedding loan, you will have one more formal debt to contend with when the dust settles.
  • Temptation to overspend. There is also the undeniable temptation to borrow more than you need and more than you can afford to make your wedding as lavish as possible.
  • Restricted lending. Unsecured wedding loans are issued exclusively to borrowers with excellent credit scores and extensive proof of their financial position.

Alternatives to wedding loans

Where specialist wedding loans are unavailable or simply not your preferred choice, the following can also be used to cover the costs of a wedding:

Credit cards

Some credit cards provide new customers with an introductory 0% interest period, which can be great for spreading the costs of larger purchases or investments over a year or so.

Bridging finance

Fast-access bridging loans are ideal where short-term repayment is possible, are charged at around 0.5% more per month, and have minimal associated borrowing costs.

Home equity loan

There is also the option of borrowing against the equity you have tied up in your home in the form of a remortgage, a mortgage extension, or a specialist home equity loan.

Before deciding which of the options is best for you, consult with an independent broker for their input and advice. Your broker will also provide the representation you need to ensure you get the best possible deal, whichever product you decide to apply for.

Living Cost Crisis Forces UK Households to Dip into Savings to Survive

The general picture for mortgage payers across the UK is becoming increasingly bleak. At no time since the historic recession of 2008 have more households struggled to keep up with their mortgage repayments? As the living cost crisis continues to escalate, things are only likely to worsen before showing any signs of improvement.

New figures from Octane Capital, a specialist property lending company, suggest that average monthly mortgage payments in relation to average salaries are breaking almost every record in the books. Taking the current average property price of £276,019 along with a 75% LTV mortgage on a 3-year fixed-rate deal, the average homebuyer is currently looking at a loan size of just over £207,000, assuming they pay a deposit of 25%.

Charged at an APR of 1.84% and taken out over 25 years, this all adds up to a standard monthly repayment of just under £860.

Across the UK, the average earner’s gross salary currently stands at £31,447, or £2,621 per month. This would therefore mean that a monthly mortgage payment of around £860 would immediately wipe out almost 33% of this average earner’s monthly income.

This is 3.1% higher than in 2011, 4.7% higher than in 2017, and a full 5% higher than at the beginning of 2020, just before the pandemic hit. In fact, the exact figure, 32.8% of the average earner’s salary going on mortgage repayments, was only higher during the 2008 recession, when it hit an unprecedented high of 34.3%.

Interest rate hikes hit households hard

The overwhelming majority of households across the UK have been hit hard by a string of recent interest rate hikes, compounded by record-high energy bills and unprecedented inflation.

“The cost of living crisis is a current cause of great concern, and many homeowners are not only combating the inflated cost of day-to-day living but also the monthly cost of their mortgage following a string of interest rate increases,” said Octane Capital CEO Jonathan Samuels.

“At the same time, wage growth has simply failed to keep pace with these rising costs, and so the proportion of our income required to cover our monthly mortgage commitments is now substantially higher than it has been for many years.”

Far from any real light at the end of the tunnel, most experts believe things are only set to worsen before there are any signs of improvement.

“Unfortunately, this cost only looks set to increase, as we expect to see interest rates increase further throughout the year. The best advice for those currently struggling is to consult a mortgage professional and see if they can swap to a product offering a better rate. For those currently looking to buy, it’s vital to factor in any potential increase and not borrow beyond your means based on current rates,” Mr Samuels warned.

“While the current cost of borrowing may still remain fairly favourable, it’s vital you consider what any further increases may mean for your financial stability, as those borrowing right up to their limits initially are sure to struggle further down the line.”

Mortgage payers are forced to dip into savings

During the pandemic, many households took the opportunity to amass considerable savings. Making the best of a bad situation, those who suddenly found themselves confined to their homes also found themselves with fewer ways to utilise their disposable income.

Unfortunately, this broad financial safety net is not going to help the approximate 17% of households across the UK that do not have any on-hand savings at all.

That is according to a report published this week by the Yorkshire Building Society, which also suggests that almost 40% of savers have been forced to dip into their savings to cope with the escalating cost-of-living crisis. Among them, 17% said that they had already spent at least £1,000 from their savings on everyday living costs.

Around 4,000 households were polled by YBS with questions on their saving and spending habits over the past couple of years. While many benefited from a long period of capped spending during the height of the COVID-19 crisis, the results of the poll suggest that a sizeable proportion of households are saving less than they were a year ago, or not saving anything at all.

Inadequate support for struggling households

As promised, Chancellor Rishi Sunak outlined the government’s relief package for struggling households on May 26. Mr Sunak confirmed that £15 billion had been set aside to help households cope with skyrocketing living costs and that the poorest citizens would receive the most support.

However, a £400 discount on energy bills for every household and a £650 one-off payment to the poorest eight million people were criticised by many as insufficient. With further energy price increases on the horizon, the vast majority of UK households are destined to find themselves further out of pocket as the year progresses.

Elsewhere, others have praised the government for at least taking some form of action, albeit at a relatively late stage in the game.

“We know that other countries in Europe have taken measures to help households with their energy bills, so this is obviously very helpful from an economic perspective, unlike the previous plan that was made available in March,” said Nitesh Patel, strategic economist at Yorkshire Building Society, in an interview with Mortgage Introducer.

“The government’s measures are really quite important because we know that there are a lot of people in this country who don’t have any form of savings.”

“If a large proportion of the population starts to reduce their expenditure in other parts of the economy, then I think we could be in a very, very difficult economic situation.”

Further financial difficulties are expected

According to YBS, around 40% of UK households are expected to see their monthly outgoings increase by between £100 and £500 over the course of the next 12 months. Among those polled by YBS, 70% cited utility bills as their biggest cause for concern, followed by 60% who are already struggling with food and drink prices, and 58% worried about fuel prices.

While being interviewed by the mortgage introducer, Mr Patel was asked to share his thoughts on projected mortgage demand over the rest of the year. As mortgage rates increase and the living cost crisis worsens, prospective first-time buyers will be forced to reconsider whether they can realistically afford to own their own homes.

“The first thing to bear in mind is that many households that have managed to build up their savings are still in a fairly reasonable situation because the cost-of-living crisis has really only accelerated in the last three months, so they’re still okay at the moment, and there are obviously still some very good deals out there available for mortgages,” Patel said.

“In terms of mortgage demand, it is still very, very strong relative to supply. And that’s probably because mortgage rates are still very, very low.”

“We know that in the current environment, people who are economising are probably not going to spend money on areas that are not really essential, and that could have a similar effect on housing.”

Mr. Patel said that, in all likelihood, home purchase activity among first-time buyers will most likely decrease over the next six months. But as demand for affordable homes continues to outstrip supply by a significant margin, this is unlikely to have an adverse effect on sky-high property prices.

He also predicted a further spike in inflation beyond 10% by the beginning of next year, triggered by the upcoming energy price cap increase coming this October.

Millions of households are on the brink of economic disaster

With inflation already running at its highest level in almost three decades, more households than ever before are finding themselves on the brink of an outright economic disaster.

A recent study conducted by KIS Finance found that even before the most recent cost-of-living increases, a full 57% of UK households were already experiencing financial difficulties or expected to struggle financially in the near future.

Bank of England base rate increases have had a major impact on mortgage affordability, resulting in millions of mortgage payers struggling to make ends meet. While all this has been going on, Moneyfacts reports that around 520 mortgage products have been withdrawn from the market over the past month as banks become increasingly stringent with their lending criteria.

In total, KIS Finance reports that around 25% of adults across the UK are currently experiencing severe financial difficulties. Worse still, all indications point to further economic issues to come, as real wages are predicted to be lower by 2026 than they were in 2008.

The October energy price cap increase coupled with the elevated energy consumption during the winter months could add up to the perfect storm for households that are already struggling.

According to KIS Finance, younger households have been hit particularly hard by the living-cost crisis—around 35% within the 18–24 bracket say their current financial situation is anything but stable. In addition, 24% of people aged 18 to 34 are earning less now than they were at the beginning of the pandemic.

Given the extent of the crisis, the support package outlined by the Chancellor—a £400 discount on energy bills for every household and a £650 one-off payment to the poorest eight million people—is understandably being seen as a drop in the ocean for those worst affected.

 

Development Finance: What Documentation Do I Need to Apply?

Each development finance product is unique. A bespoke agreement was reached between the issuer and the borrower. There are various different types of development finance that can be issued, each targeting different kinds of developments and fulfilling developers’ individual requirements.

But what remains consistent with all types of development finance is the importance of submitting the appropriate paperwork. The documentation you provide to support your application will play a major role in determining your eligibility for funding.

It is therefore essential to ensure you have the right documentation in place ahead of time, reducing the risk of delays and disruptions.

What paperwork do I need?

The extent of the paperwork required as part of your application for funding will be determined by the nature and extent of your requirements.

However, the overwhelming majority of lenders will expect to be presented with formal evidence of the following as standard:

  • The value of the property at the time of your application
  • The estimated final value of the completed development
  • An overview of all construction and renovation costs
  • A complete dissection of the project’s schedule and deadlines
  • Extensive evidence of your experience and track record
  • Examples of successfully completed similar projects
  • Full disclosure of all providers involved in this project
  • Confirmation of receipt of planning permission and permits
  • Acknowledgement of any restrictions that may apply

In addition to the above, you will also need to provide your lender with evidence of a workable exit strategy. Your job is essentially to convince your lender that you are a safe candidate for development finance by showing them exactly when and how you will repay the facility.

This could be in the form of a lump-sum payment following the sale of the completed development or by transitioning your development finance loan onto a longer-term repayment product.

Do I need a broker?

While broker support is not mandatory when applying for development finance products, it can be beneficial in a variety of ways.

A few of the many advantages of enlisting independent broker support:

  • Access to the broadest possible market of lenders and development finance products, as many specialist service providers offer their services exclusively via introductions.
  • Independent expert advice on the various types of development finance products available will help you make the right choice for your project.
  • A knowledgeable and experienced professional to negotiate on your behalf, ensuring you get the best possible deal from a top-rated lender.
  • The advice and support you need to present a convincing application, complete with all necessary documentation and supporting evidence,
  • A faster and simpler application process is essential when looking to secure funding in a time-critical scenario.

As broker support is offered 100% free of charge to the client, it simply makes sense to take advantage of their knowledge and expertise.

For more information on the logistics of development finance or to get your application underway, contact a member of the team at UK Property Finance today.

Has the Day of the Amateur Landlord Come to An End?

Research suggests that more established landlords than ever before are opening limited companies to benefit from tax incentives when purchasing BTL homes and running their private letting businesses. Elsewhere, some polls have indicated that economic pressures on the BTL landlord community are prompting many to consider liquidating their portfolios and exiting the market entirely.

All of this has reinforced the views of some commentators that the day of the ‘amateur’ landlord is coming to an end. But is this really the case?

As with most things, it depends on your definition of an ‘amateur’ landlord. For regulatory purposes, amateur landlords are classified as non-portfolio landlords. This, according to the Prudential Regulatory Authority (PRA), means a landlord with three or fewer BTL properties in their portfolios.

Consequently, an investor managing three BTL properties at the same time and running a successful business would still, in regulatory returns, be referred to as an amateur landlord. Given how the overwhelming majority of BTL landlords in the UK have three or fewer properties under their ownership, referring to this entire community as ‘amateur’ landlords is questionable, if not quite condescending.

A profitable long-term venture

Up and down the UK, sky-high monthly rents are playing directly into the pockets of BTL landlords in most key regions. Unsurprisingly, recent figures published by UK Finance indicate a huge spike in interest in first-time buy-to-let investments among newcomers aged 55 and over last year.

In 2021, there were approximately 17,570 buy-to-let property investors within this age group. This represents an increase of more than 56% from the year before when there were just 11,240 buy-to-let investors aged 55 or over.

This suggests that more people than ever before are looking into the UK’s booming BTL sector. With average property prices only set to continue increasing at a record pace, picking up a property to let out is not going to get any cheaper—something that could explain the ‘now or never’ mantra being adopted by many, who see holding out any longer as a risky decision.

A premature declaration

For a long list of reasons, proclamations regarding the end of the age of the amateur landlord are premature, to say the least. For one thing, the number of people across most age groups looking into BTL investments as first-timers is actually on the rise.

Data published by Zoopla this week indicates an 11% increase in private rental prices during the first three months of 2022, taking the average cost of renting a UK home to £995. All of which adds up to a hugely profitable long-term venture for investors with rental properties in the right places.

In addition, a report published by the London School of Economics on behalf of the National Residential Landlords Association indicated that a full 64% of landlords in the UK have three properties or fewer. 32% of them have one unit, whereas 13% have three properties under their management. Figures that call into question the definition of an ‘amateur’ landlord confirm that the age of the amateur landlord is far from the end.

Women in the Workplace: Encounters With Inequality

Today, let’s talk about the inequality women encounter in the workplace.

Did you know that studies show that in 2022, women in the UK will be paid just 90p for every £1 earned by men?

The results of the government’s latest gender pay gap report are unfortunately unsurprising to me. Among the cost of living crises, it paints a dismal picture of the realities of being a woman in 2022.

Even though companies that are gender and ethnically-diverse outperform their peers, inequality is still present. What’s more, companies with low rates of both gender and racial diversity are 29% more likely to make less money. In other words, it is damaging to a company’s performance if its leadership teams do not have diversity.

Research shows that inclusive teams make better business decisions up to 87% of the time. As you can imagine, teams with less diversity are more likely to make poor choices for the company. Diversity is needed not only for equality and basic human rights but also to succeed! Difference is a blessing, not a curse, and it enables creativity. Every human sees the world uniquely and has different knowledge, perspectives, and points of view.

Being a female entrepreneur is no walk in the park either! Studies show that only 29% of small businesses in the UK are run by women. However the inequality does not stop there; 1 in 3 female entrepreneurs have experienced sexism running their own business, and 91% of female entrepreneurs say gender bias and inequality are common in business. I find this appalling; even setting up a business is not enough to earn equal rights in some people’s eyes. Not that equal rights should have to be earned anyway.

While the Sex Discrimination Act and the Equal Pay Act were established back in 1970, extensive progress towards financial equality has been limited.

Last year, the Institute for Fiscal Studies argued that the gender pay gap has seen “barely any change” over the past 25 years once increases in women’s education are accounted for.

Despite this, I am forever hopeful that one day we will finally achieve wholesome equality. Sheryl Sandberg once said, “In the future, there will be no female leaders. There will just be leaders.” This will be the day when there is no shock factor when a woman is in a position of power. This will be proven on the day that all the above stats sit at 50%.

After reading this, I would like you to think about three things today:

  1. Have you experienced inequality in your workplace?
  2. Why are we still experiencing inequality in the workplace?
  3. How can we change the inequality that is being presented?

Resources:

How Will the Most Recent Hike in Interest Rates to 1% Impact Your Mortgage?

The Bank of England has, for the fourth time in a row, increased interest rates this week. In a bid to tackle the spiralling inflation rate, the bank has raised rates from 0.75% to 1%. With the cost of living crisis seriously affecting household budgets and causing financial stress for millions of UK citizens, it is critical that the Bank of England find a way to stabilise the economy to prevent inflation from rising even more.

The increase means any homeowners on variable-rate mortgages will see their monthly repayments increase, while those on fixed-rate mortgages will be safe until the end of their fixed period.

The Bank is aiming to bring down the inflation rate, which is currently at 7%, back to its target of 2% by increasing interest rates, which will discourage lending and encourage saving, but experts are warning that by doing this, the Bank is pushing people to their financial limits. Some, however, believe that despite the hike, interest rates are still relatively low.

Personal finance analyst at investing platform Best invest, Alice Haine, said, “While mortgage rates will rise, the cost of borrowing is still historically low, so there’s no need to go into full panic mode yet.

“Yes, most lenders will pass the rate rise onto borrowers, but with interest rates still very much on the low side, the increase in percentage terms is modest.”

She went on to say that with living costs being so high, the pressure was increasing: “This might not have been an issue in a normal economic climate, but in the current cost-of-living crisis, every pound matters as households struggle to balance the books.”

Some experts feel that the Bank of England’s actions will be either a grave mistake or incredibly insightful, depending on what happens over the months to come.

James Andrews, senior personal finance editor at money.co.uk, said, “One thing we can say for certain,” he added, “is that it will do almost nothing to bring down the cost of living for households across the UK, which is being driven by global energy prices and supply chain issues.

“Another thing we can say for certain is that it will make borrowing more expensive at a time when more and more people are being forced into debt to meet rising bills.

“We can also say with some certainty that it will put downward pressure on house prices, making mortgages more expensive at a time when rising essential bills make them less affordable too.”

How does the increase affect your mortgage?

There are approximately 1.1 million homeowners on standard variable rates in the UK and 850,000 people with a tracker, and all of them should expect to see their payments increase.

It is typical for lenders to adjust interest rates accordingly when the Bank of England raises rates, although they are under no obligation to do so. Generally, they do tend to pass on the increase.

Tracker deal clients are expected to see an immediate increase in payments.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Banks will be falling over themselves to pass on the rise to variable-rate mortgage customers before the ink dries on the Bank of England announcement.”

As an example, a homeowner with a 25-year standard variable rate mortgage of £300,000 can expect to see a monthly increase of around £40. The advice is to try to remortgage at a fixed interest rate to protect against any further increases.

How does the interest rate increase affect fixed-rate mortgages?

Essentially, those on fixed rates (approximately 75%) will not be affected. However, many of these deals will come to an end this year, so it is advisable to look around before the end of the period, bearing in mind that mortgage offers are valid for 6 months.

Alice said: “Shopping around now for a deal might also be wise for those on a fixed-rate deal with a 2022 expiry date or those looking to remortgage, as mortgage offers are often valid for a number of months. This will protect them from the effects of further hikes and help to avoid a financial shock.”

Are there any pros to the increase in base rate?

The ones benefiting from the increase are the savers! With the increase in rates, interest on savings will also increase, which is great news for those trying to save up a deposit.

The downside here is that with the inflation rate at a forty-year high, the interest on savings is eroded by the cost of living crisis.

Should I Port My Mortgage, and What are the Alternatives?

Taking your mortgage with you when you move is called porting, but is it a good idea, and will your lender let you do this?

The choice to purchase a mortgage does not always lie with the homeowner, and some lenders will not even consider allowing you to do this.

We look at the process of obtaining a mortgage and whether it is the right path for you when you move home.

Porting a mortgage explained

Although not many people know this, there are a great many mortgages that are ‘portable’, in other words, can be transferred from your current property to a new one. However, even though on paper your loan may be portable, you may still be blocked from doing this.

Although this may be an attractive feature of a mortgage, it does not guarantee that you will actually get permission from your lender.

A few reasons why porting may not be advisable include the following:

  • You are required to reapply for your mortgage and risk being rejected. When porting, you will need to go through the application process all over again, and there will be no guarantee of acceptance. Your personal circumstances will likely have changed, and this can affect your chances. Alternatively, the lender’s application criteria may have been altered to reflect the current market.
  • You may not be able to borrow the amount you wish. If you are planning on moving to a bigger or more expensive property, you may be turned down on the basis of affordability criteria.
  • You may need to take out two loans. If you are moving to a more expensive home, you may need a second loan to cover any additional costs. The lender may require you to put any additional funds through a separate mortgage product, which will undeniably result in additional arrangement fees and legal costs.
  • You may end up with a high-interest rate. If your lender does allow you to port and approve a larger amount, you may end up agreeing to a higher interest rate as you will be limiting yourself to a single lender and thereby not taking into account competitive interest rates available from other lenders.

What can you do if you can’t port?

The alternative to porting, if your lender does not allow this, is to find a new mortgage. Leaving your current mortgage early can result in charges and fees, so it is best to weigh up all your options before making any commitments.

  • Early repayment charge: If you are still in the introductory offer stage of your home loan, you may be subject to charges should you change your mortgage. There are unlikely to be any charges levied should you be past this initial deal period.
  • Exit fee: When a mortgage is paid off, you typically need to pay an exit fee. Normally, this is just a few hundred pounds, but you may have paid it at the onset of your mortgage, so make sure you check first.
  • Fees for new mortgage: You will be required to pay arrangement fees and legal fees for any new mortgage you take out following your exit from a previous home loan.

Should you port if other deals look better?

It’s all about the calculation in this circumstance. The numbers don’t lie, and it may very well be the case that you can find a much better deal with lower interest rates by shopping around. There may be exit and early repayment fees, so make sure to account for this.