The first piece of good news on the mortgage front is that, on 1st August 2024, the Bank of England cut the base rate for the first time in a year, from 5.25% to 5%. This had been anticipated by lenders, which is one reason why we have seen mortgage interest rates gradually coming down this year. However, now that the bank rate has actually started to fall – and with inflation back at its 2% long-term target – this should cement confidence in the market.
Now that we’re coming to the end of the quieter summer holiday period, this is when the property market starts to pick up again, as those who want to make a move before the end of the year start to buy and sell.
So, if you’re a first-time buyer, over the next few months you should see both more property options and better financing deals.
Whether you’ve already been looking for a while, or you’re just at the start of the hunt for your first property, here are three steps you should be taking to get yourself ‘mortgage ready’ before you view a property. This means that when you find your perfect home, you’re ready and prepared to make an offer and the agent and seller are more likely to know you are a serious buyer.
- Speak to a mortgage broker
In their May Property Sentiment Index, OnTheMarket revealed that 28% of movers hadn’t considered applying for a mortgage before starting their property search, with only 9% having secured an Agreement In Principle (AIP). This means buyers can be looking at properties that they don’t know if they can afford.
A good mortgage broker will have access to a vast range of deals and will quickly be able to help you understand how much you can afford to borrow and the maximum a lender will offer you. They will be able to secure an AIP, which essentially confirms this, and can also help you start collecting the information you will need to make your formal mortgage application.
While an AIP is not a mortgage offer, it will give estate agents and sellers the confidence that you can afford the properties you view and make offers on. Essentially, it helps you present yourself as a serious buyer and may give you the edge over someone else who has not carried out their own financial due diligence.
- Make sure you understand all the financial costs of buying
In addition to the cost of the mortgage, you will need to have sufficient money set aside for the following. Importantly, you have to know when payment will be due, so you can ensure the funds are accessible:
- Mortgage application fees
- Survey fees
- Legal costs – note that if you are buying a leasehold property, these costs will be significantly higher
- Deposit – and if you have used the government’s Lifetime ISA scheme to save for your deposit, be sure to keep your LISA provider informed on the progress of your purchase
- Purchase tax:
- In England, Stamp Duty Land Tax, if buying over £425,000
- In Wales, Land Transaction Tax, if buying over £225,000
- In Scotland, Land and Buildings Transaction Tax, if buying over £175,000
- Removals (if necessary)
Your broker and any good agent will go through all these with you.
- Keep your broker informed of any changes in your circumstances
Any change in your personal and financial circumstances while could affect your borrowing ability – positively or negatively - so it’s important to keep your broker informed. That’s things like:
- A change of employer or job
- Switching from being employed to self-employed
- A baby
- A pay rise
- Any bad credit
- A criminal conviction
The last thing you want is to find your dream home, only to discover that you can’t borrow as much as you thought.
To get the ball rolling on your mortgage – and it’s never too early to start! – contact our experts for an initial affordability assessment. Our advisers can talk you through the application process and discuss the best available deals that would be most suitable for your circumstances as well as be a great sounding board throughout your move process.
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