Interest rate news – the latest increase by Bank of England

The latest interest rates rise has seen an increase from 5% to 5.25% from the Bank of England, the 14th consecutive increase from the institute. Now at their highest point in 15 years, our latest blog post provides insight in to the predictions made by economists regarding future inflation and interest rates in the coming months.

How does this affect my current mortgage offer?

When it comes to your current deal, those on a tracker or variable mortgage, or anyone due to renew next year, is particularly vulnerable to changes in interest rates.

This increase means that these mortgage-owners can expect rising prices, resulting in you having to pay back more money to your lender every month. An option to try and release some of this burden would be to extend terms, giving you an extended period in which to make your payments.

In regards to fixed rate mortgages. Current deals being offered by lenders have already increased to reflect the rate rises, with the average two and five-year fixes between 6 and 7%.

Click here for more information regarding mortgage types.

How will it affect my likeliness to get my first mortgage deal?

If you are looking to get your first mortgage deal then all of the above will apply. You can expect to require a larger deposit to offset the borrowing costs from your lender and to have a higher interest rate, even with fixed rate deals.

Essentially rising interest rates makes borrowing more expensive, which in turn makes monthly repayments increase as well as the total amount a buyer pays in interest over their mortgage term.

Your likeliness to be given a mortgage deal by a lender will be determined by the following:

Age
Income
Debts
Employment status
Credit score

However this can be assisted in some way with a LTV or a zero deposit mortgage – targeted at first time buyers.

Loan-to-value (LTV) mortgage

A loan-to-value (LTV) mortgage, otherwise known as a 95% mortgage, requires buyers to raise only a 5% deposit.

The LTV (Loan to value) is a ratio of a home loan relative to a property’s value. For example, a mortgage worth £190,000 on a £200,000 home has a 95 per cent LTV. Buyers then make up the five per cent difference with a deposit — in this case, £10,000.

Zero deposit mortgage

Predominantly aimed at renters who lack savings or financial support from their family but hoping to purchase their first home and enter the property market.

The deal is available for first-time buyers across the UK. Tenants aged 21 and over may be able to take out mortgages at between 95 per cent to 100 per cent of the value of the property they want to buy.

This product would not allow borrowers to pay more for their average monthly payments than they were handing over in rent.

Applicants will also need to demonstrate at least a 12-month track record of paying their rent and bills on time.

When can it be expected for interest rates to come back down?

Predictions surrounding interest rate rises and decreases are very much that, predictions, however some key investors have expected a peak of around 5.75% towards the end of 2023. At this point it is then expected that a decrease will be on the horizon.

Nina Scaroni, chief executive of the Centre for Economic and Business Research states that her timescale for this would be Summer of 2024 when speaking to Sky News.

However this will all be determined by inflation and the rate at which this comes down. It is unlikely that the Bank will lower the base interest rate until this is visible. The reason for this is to avoid people spending more and the inflation rising even higher.

The silver lining in all of this though is that The Bank of England will be keen to get interest rates down sooner rather than later, as keeping them high for a long period of time increases the risk of negative economic growth and a recession. And they predict that inflation will decline throughout the rest of 2023 – and so it’s likely to lower rates slowly in response to that.

Looking for guidance on your current mortgage deal?

At the Mortgage Hub we work as an independent broker, looking to provide you with the most informed and trusted guidance based on current market offerings.

If you are looking to review your current mortgage offer or indeed are looking to get that first step on the property market, our team are on hand to advise.

Our Hamilton office is open Monday to Saturday, get in touch on 01698 200050 or e-mail info@mortgagehub.co.uk to arrange an appointment and speak to one of our mortgage advisors.

Our team will then do all the work to research your options and will work hard to negotiate the best deal for you and your savings.

Understanding Your Energy Performance Certificate (EPC)

Over the last 18 months, we have seen our energy bills more than double. Following the pandemic and subsequent economic restrictions, life has returned to normal. As a result, demand for gas started to increase at a time when there was a shortage forcing prices to rise. This was made worse with renewable sources such as solar and wind power were producing less energy during the winter when demand spiked. The increase in gas prices meant that some energy suppliers across the UK went out of business. Add to this the invasion of Ukraine, supplies were threatened, and prices increased even higher. Russia is one of the world’s largest oil and gas suppliers, supplying Europe with 40% of its energy in 2021.

EPC ratings

An EPC is a legal requirement when you sell your property. a The most common EPC rating for homes in the UK is a D, so this is a good benchmark to aim for. If your home is newly built, it should have an EPC rating of A or B – only around 4% of existing homes reach this rating. If you have a rating of E, F or G, you’ll need to consider improving your rating to improve the value.

Although the EPC rating is important, it’s not the only thing the certificate will give a buyer. It shows your buyer how much energy your home uses and the cost, and recommendations of how to make the home more efficient – giving buyers an idea of how much they will need to spend to make the home energy efficient, which can lead to negotiations on price.

When you put your home on the market, you will need a valid EPC within seven days, and your estate agent will help you to organise this. If you don’t have a valid EPC, you risk a fine of up to £5,000. If you aren’t selling or renting your property, you don’t need a valid EPC, but it can give you information on how to improve your property and reduce your bills.

The EPC is valid for 10 years even if it changes hands in that time. However, if you make changes to the property in terms of insulation, windows, heating or lighting, it would be beneficial to get a new one as this will be beneficial to you when it comes to the value and price negotiations.

To find the EPC rating of your home, search for your address on the Scottish Energy Performance Certificate Register and download it as a PDF.

All EPCs must be carried out by someone who’s accredited. You can find one on the government’s register: Find an EPC assessor in Scotland

When you have an EPC rating of your property, a certified assessor will thoroughly review the interior and exterior of your property to evaluate how much energy is currently used and how much carbon dioxide it produces. This includes checking:

Walls and roof
Insulation
Age and size
Windows
Heating system
Lighting
Fireplaces or wood burner
Renewable energy sources

You can obtain a digital copy of your EPC once it has been completed.

Homes that don’t require an EPC

If your property is protected, listed or located in a conservation area you might not need an EPC. This is because the improvements required would alter the property, which may not be allowed. In addition, homes that are holiday lets for less than four months a year or let under a licence to occupy don’t need an EPC. Residential buildings not used over four months a year and buildings due to be demolished don’t need a certificate.

You may not need one if your home is listed, protected or in a conservation area. It’s because energy-efficient improvements could alter the property’s appearance too much.

EPC and rental properties

For rental properties, it’s required that it has a rating of E or above, or landlords could face a £5,000 penalty. New rules coming in mean that all new tenancies must have a rating of C or above by 2025 with a penalty of £30,000 if it doesn’t meet this target. And by 2028 all rental homes need to have a rating of EPC of C or above even if they have an existing tenancy.