Mortgage advisor Rhys Schofield of Peak Mortgages and Protection

Mortgage advisor explains impact of mini-budget on homeowners

Posted by: Laura Hammond

Thu 29th September 2022

Mortgage rates – and whether homeowners will be able to afford them – has been top of the national news since the Chancellor gave his mini-budget on Friday (September 23) last week.

We understand that this can be concerning for lots of people, especially if you’re not completely sure what it all means in real terms.

We asked local mortgage advisor Rhys Schofield, of Peak Mortgages and Protection, to explain how the changes we’ve heard so much about will actually impact homeowners.

Here’s what he had to say…

It’s certainly a stressful time to have a mortgage. Off the back of last week’s mini-budget from the government there has been a big reduction in the value of the pound that’s dramatically raised the costs of borrowing. The knock-on effect of this has been felt almost immediately in the mortgage market.

The short version is that because of this sharp increase in costs of getting money to lend to customers, lenders have had to increase the costs that they charge so they don’t actually end up losing money on every mortgage.

The problem has been that because of the pace of change, lenders just didn’t know what to price their details at so what we saw was a number of lenders pulling their products whilst they do their sums to work out what to charge people.

Luckily many of these have now returned with new products or are coming back with new products over the next few days. That being said, rates are going to be higher for new mortgage deals.

I saw a client last night to finalise their life insurance that had applied for their mortgage in May and if they were having to apply on the deals currently available that would be an extra £483 a month in repayments. That’s pretty grim news for a lot of people.

As someone who started in the industry during the credit crunch, I can say that this is very different. Banks haven’t run out of money, mortgage lenders have money to lend and want to do so but this week they genuinely got walloped with having to factor in rate rises that we were probably expecting over the next six months in the space of a matter of days.

I think everyone was blindsided by the mini-budget but it does go to show that maybe governments should listen to experts sometimes.

Politics aside the question is how will this affect normal people?

If you’re on a fixed rate deal the good news is that this is set in stone for the duration of your deal. That being said, if this is ending soon you really need to talk to someone now to plan for what rates are going to do then, as deals can normally be ‘locked in’ six months in advance and if rates are going to keep rising you might be able to get a cheaper deal now that if you leave it to the last minute.

What I would also add is that if anyone is coming to the end of their deal within the next 12 months or so it would still be worth a chat to check out the lie of the land.

The reality is that some households will not be able to afford the repayments when their mortgage does go up and will need to plan accordingly. If being forced to downsize is on the cards, you don’t want to leave selling a house to the last minute and be forced out of desperation to take a late offer. Not a fun offer for us to deliver but one that is ever so important.

If you’re on a variable or tracker rate, the bad news is that you’ll likely feel changes to the Bank of England Base Rate pretty swiftly and it looks pretty likely that this will have to be increased over the coming months. That will mean higher repayments as the rate of interest you’re likely to get charged goes up. Again, a chat with an advisor is 100 per cent a good idea.

The other thing is people who have maybe applied for a mortgage. Well the good news is that if you’ve made a full application to a lender that generally secures the rate for you and then when you get your binding mortgage offer, this is typically valid for six months. This should allow plenty of time to get everything through in time for you.

Regardless of your situation, Peak Mortgages and Protection are here to help either from our Milford office or over video. We’re very proud of our local reputation for helping people. We were the first mortgage business in Derbyshire to get 400, 5 Star Google Reviews and have won three awards now for being Derbyshire Mortgage Advisors of the Year. The cherry on the top is that our standard residential mortgage advice is fee free so it won’t cost a penny to chat and hopefully give some peace of mind.

No question is a silly question and we’re happy to talk to anyone that needs us.

If you’d like some advice about this, contact Peak Mortgages and Protection on 01773 826575 or visit the company’s website here.

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