When will interest rates go up (or down)?
On 22nd June 2023 the Bank of England (BOE) raised the base rate from 4.5% to 5%, its highest level in over 14 years.
The BOE raised interest rates to reduce the UK’s annual inflation rate, which now sits at 8.7%, well above the target rate of 2%.
The market is pricing in further interest rate hikes in 2023, predicting that the Bank of England base rate will rise to 6%-6.5% by the end of 2023 before slowly falling over the next five years to end up around 3.6%.
Worryingly, this predicted peak in the BOE base rate is higher than was predicted just a few weeks ago as concerns grow that the BOE might have to raise the base rate more aggressively than previously thought to combat inflation, which fell less than expected in April.
The Bank of England will next meet on 3rd August 2023 to decide what level interest rates should be set at.
Should you fix your mortgage rate now?
In the last week lenders have pulled hundreds of fixed-rate mortgage deals and raised the rates on their best mortgage deals as they are worried the BOE may raise its base rate further.
With the BOE base rate at 5% and the market pricing in further increases you should consider fixing your mortgage if you are worried about how high interest rates might go and whether you can keep up your mortgage repayments.
Even if you are currently on a fixed-rate mortgage, where the fixed period isn’t due to expire for another 6 months, it may be possible to lock into a cheap rate now, which may not be available if rates continue to rise.
Historically the best fixed-rate mortgage deals quickly disappear as soon as there is any sign that the BOE might raise interest rates again.
What to spot when choosing a valuer
Valuations can be one of the most contentious and time-consuming parts of the mortgage process, as a result many lenders have been looking at ways to improve this part of the process.
We are seeing some lenders utilising in house valuers; using desktop valuation models based on average asset values or simply resorting to Zoopla and google street scene.
Fixed price or free valuations are also being pushed to speed up the process.
Our experience has shown that when presented with 4/5 quotes, the cheapest is not always the best value, often these are national valuation firms, who subcontract out to the nearest and/or available valuer who may not know the area, resulting in a conservative valuation figure. When appealed we have not yet had a valuation overturned or increased, even though, subsequent valuations through other lenders invariably get a better result.
Our advice is always to look for a local experienced valuer, who knows the market, even if that costs a little more at the outset.
VAS Panel introduces guaranteed fee scale
For example, the VAS Panel has introduced a guaranteed fee scale for valuations of standard residential properties with an estimated value of up to £2,000,000. The move offers short form templates from £265 (excluding VAT) for single houses, single flats, and single buy-to-lets in England. A guaranteed fee scale benefits from instant instructions without having to wait for quotes, provides consistent and transparent pricing for applicants and makes valuations quicker. Stephen Todd, chief commercial officer, said:
“Approximately 50% of our quotes and instructions are classified as residential properties so for us this is a huge move. For lenders, brokers and their clients it offers a guaranteed price at the start of the valuations process while also delivering faster reports and ultimately a quicker drawdown.”
VAS Panel, Press Release
It is worth pointing out that this hasn’t yet been adopted by all lenders.
EPC – The efficiency drive
All major banks are under huge pressure from regulators to make its mortgage book ‘Greener”. That is, by boosting the average Energy Performance certificate (EPC) ratings on the homes owned by its mortgage customers.
As a result, we are seeing discounts offered by some lenders on properties with EPC ratings of A, B or C, with lenders are offering discounts on the rates or arrangement fees when taking new mortgages or development finance.
Keep in mind that all rented properties need to be rated E or higher from April 2023 and that by December 2028 all Commercial and residential property needs to be rated C or better.
In the meantime any new tenancy from December 2025 has to meet the new higher threshold of C, with potentially high fines for non-compliance.
BFS – Other services
Most of the clients who receive this newsletter are familiar with our property related lending services, however we would draw your attention to the fact we also offer highly competitive HP/Leasing/commercial loans for vehicle purchases and equipment, often more competitive than dealer provided finance-Why not give us a try?
