Rising Mortgage Rates: Impact On Manchester Homeowners

Posted on: 24 June 2023


Today's increase in Bank of England rates has caused concern among homeowners in the Manchester property market, particularly those with impending remortgages or those looking for new deals.

The decision by the Bank to raise rates by 0.5% has sparked discussions about the potential consequences and the necessary steps for Manchester homeowners to consider.

For some homeowners, the immediate impact will be felt in their monthly budgets. Those with typical tracker mortgages can expect an average increase of £47 per month, while those on standard variable rate mortgages may face a £30 increase.

However, it is important to note that approximately 4 out of 5 mortgage customers in Manchester hold fixed-rate mortgages, which provide a temporary shield against immediate payment adjustments.

Nevertheless, prospective homebuyers and those planning to remortgage in Manchester now face the daunting prospect of higher repayments. Thankfully, most lenders have already factored in these increases, so there will be little change in today's fixed rates compared to yesterday.

Seeking advice from a mortgage broker becomes crucial to secure the best possible rate in the evolving Manchester property market (feel free to reach out if you need to speak to a qualified mortgage arranger).

One viable strategy for borrowers is to consider increasing their equity in the property, which can lead to a lower loan-to-value ratio. Banks and building societies often offer preferential rates to lower-risk customers, and increasing equity can contribute to obtaining more favorable terms. Some parents are even gifting their children some of their inheritance to reduce their mortgage exposure.

Additionally, borrowers struggling with monthly payments might explore extending their mortgage term. For example, converting a 20-year mortgage to a 35-year mortgage can reduce monthly payments from £1,259 to £938. However, it's important to approach this option cautiously as it results in higher overall interest payments over the long term.

For those considering remortgaging in six months, it is advisable to capitalize on the flexibility of mortgage offers, which can typically be held for six months. This allows Manchester homeowners to secure a rate without committing prematurely, enabling them to take advantage of potential market improvements. Furthermore, borrowers nearing the end of a fixed deal might consider making regular overpayments to reduce the loan size and familiarize themselves with higher monthly payments. However, borrowers should be mindful of any overpayment limitations set by their lenders to avoid incurring additional charges.

Homeowners with fixed deals set to expire in the coming years should prepare for potential rate increases. While interest rates are projected to decrease by 2025, securing a new deal at the same favorable rate may prove challenging. Thus, it is wise to start budgeting for future mortgage cost increases and explore strategies to mitigate the impact.

In terms of how it affects Manchester house prices, this is the 13th consecutive rise in as many months. Just last week, 24,201 homes were sold subject to contract (STC), with a running weekly average of 22,289 house sales.

It's important to remember that interest rates reached as high as 15% in 1992, so the current rates remain historically low. Despite alarming predictions of a house price crash, the situation is far from past crises. Home repossessions and negative equity levels are not significant threats, and house prices nationally have risen by approximately 20% since 2020.

Additionally, wage growth outpaces the slight increase in mortgage costs for those not on fixed-rate deals.

It is crucial to put things into perspective. Reports about higher mortgage expenses fail to acknowledge that mortgage applications since 2014 have been stress-tested at an interest rate of 5%, ensuring borrowers' affordability. The property market's resilience and homeowners' ability to adapt to changing circumstances remain intact.

In conclusion, the recent rise in mortgage rates has raised concerns among homeowners in the Manchester property market, especially


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