2016 has been an exciting year for the mortgage market so far. Over in the US, Janet Yellen has raised the Federal funds rate by a quarter of a percent. But here in the UK, interest rates remain rock bottom after nearly seven years close to zero. It’s not clear how much longer rates can stay so low, but it’s good news for people wanting a mortgage.
Yes, house prices are very high right now – back to their pre-crash levels. But the interest rates on those mortgages are low, thanks to easy money from central banks. That means that if you can get your hands on a mortgage, the amount that you pay in interest is still at historically low levels.
The world, however, is entering uncertain times. The recent slowdown in global trade is a worry. And so too is the potential bubble in asset prices both in the UK and the US. So what advice is there for people looking to get a mortgage?
Get A Fixed Rate Mortgage
Interest rates are at historic lows. That means that the only real direction they’re likely to go is up. (Although there is some talk of negative rates). That means that most people will be better off with a fixed-rate mortgage. If central banks decide that inflation is a problem, they’ll likely raise interest rates. But because houses are now so expensive, this implies much bigger interest bills on mortgage payments. And that’s bad news for your future income.
Consult The Professionals
Buying a home can be a complicated process. Ask your estate agent the questions that are relevant to you and try to find out where are the best bargains. Click here for more info.
Consider Your Lifestyle
You might believe that you can afford a mortgage on paper. But there’s more to living in a new house than paying mortgage payments each month. There are other costs that you need to consider, like heating, lighting and generally running your home. Take these into consideration before taking out a large mortgage.
Save For A Down Payment
The amount of money that you have to put down for a down payment on a home has been whittled away by successive governments. A 20 percent down payment used to be standard. But since home prices have risen so much, down payments are down at the 5 percent level. This is good news for people wanting to buy a home right now, though it’s bad news for the economy as a whole.
Improve Your Credit Score
Even though it’s easier than ever to get a mortgage, banks still want to know if you are credit-worthy. That’s why spending some time building up your credit rating is a good idea. You can do this by paying all your bills on time, spending on a credit card and paying it off each month and so on. Try to reduce your debt levels to below 35% of your annual income too. This makes lenders more confident that you’ll be able to afford a mortgage.