I have been a mortgage broker for 29 years. I was once a pretty confident forecaster, happy to share all manner of predictions on interest rates, and house prices.
But no more as I’ve come to the conclusion that making predictions is a combination of overanalysis, guesswork and crystal-ball gazing, buffoonery only attempted by the very brave, the very stupid, or those with a particular reason for doing so. This year, as an example, I have seen house prices predicted to fall by more thanp 10 per cent on one side, to a rise of 5 to 8 per cent on the other.
What we do know is the Bank of England Base Rate is currently at 3.5 per cent and that the financial markets are predicting they will go up to 4.5 to 4.75 per cent this year.
The point of this is that none of us really know what is going to happen next, especially after the last few years. Trying to call or play the market, especially where property is concerned, is fraught with risk.
We are seeing them starting to fall, and I think this will continue in the first quarter of the year as lenders get competitive again and will stabilise so most people can borrow at between 3.5 to 4.5 per cent, which is affordable for many.
But while it is difficult to predict what will happen with house prices, it is possible to ensure you get the possible mortgage rate. So, what are the inside tips?
First off, the obvious shocking headline from a mortgage broker by trade; use a mortgage broker. Or to be absolutely clear, please at least speak to one or two.
There are more than 90 mortgage lenders in the UK, many of whom you will not be able to access without speaking to a professional. Many of them have the best products for you, some the cheapest, some the most suitable for your type of work, some if you have had credit issues in the past, one year’s accounts, freelancing, sportspeople, high-net-worth borrowers with multiple income streams, etc.
The high street is a small snapshot of what is out there. And with thousands of different products, many like offsets that your own bank may not even provide, you could be missing out on saving hundreds if not thousands of pounds over the term of your mortgage if you do not take some advice.
Over 85 per cent of borrowers choose to use a broker these days and that says more than anything else.
Using a broker is only part of it though, and it helps to do some research yourself. Check you know exactly what your own bank or existing lender will offer you, plus check out one of the well-known search sites as a guide. This will all help in your conversations.
What you will find is that everyone you know, love and have ever known will suddenly become a property and mortgage expert, especially your mate down the pub. The fact that I have studied for professional qualifications and done this job for more years than I like to admit pales into insignificance when faced with those immortal words: “Yeah, but my mate reckons…”
Take advice from close family and friends sure; who did they use? What issues did they have? But unless they have qualifications at least check these out with someone with their finger on the pulse of the market every day.
To make sure you stand the best chance of getting the best rate, preparation is essential. Apart from the fact that sometimes you need to move quickly to secure a rate, getting all the documentation ready and in good order helps a lender make a decision.
This preparation includes basic points like making sure you pay your bills on time, keep within agreed overdraft limits, and cut out things such as online gambling three months before applying. Also, if a friend is transferring money to you as, for example, payment for some concert tickets you bought, dissuade them from putting in a “funny” reference. “Drugs” or “Miss Miggins Adult Massage Services” may not read well to an underwriter going through bank statements to decide if you are mortgage worthy or not.
One easy top tip is to make sure you are registered on the electoral roll at your current place of residence. It doesn’t mean you have to vote but shows that you live where you say you do easily.
Have bank statements, payslips, P60s or your last two years accounts readily available. If you are self-employed speak to an adviser and your accountant early on to check you have your accounts structured correctly and up to date in order to be able to get the best possible rate.
Finally, hindsight is the devils’ tomfoolery. Once you decide, enjoy your new home. Don’t worry that prices may drop a little, rise or what mortgage rates do. A property to live in is a long-term home to build a life and memories in, not a short-term money-making toy.
If you can look yourself in the mirror and say I made the best decision that suited me at the time, with the most knowledge and advice I could get at my disposal, then that is all that matters.
I do suspect however, that many who do end up buying in 2023 will look back in the mirror in a few years’ time and be able to afford themselves the luxury of a privately smug grin.