Whether you are a first-time buyer or if it is time for you to remortgage your property, there are different options of home loans available to you. Most mortgages are subject to a maximum loan to value, which is the number lenders use to measure the relationship between the mortgage amount and the market value of your property. However, despite the different types of mortgages available, there are several different factors influencing the rate that a lender will offer you.
One of the main reasons why the mortgage rate fluctuates is down to inflation, which is the rate at which prices rise and fall. Inflation is measured in several ways, but mostly with the consumer price index and retail price index, and both measure the prices of consumer goods and comparing this to the year before. This rate is used to figure out a wide range of decisions, because if prices rise, then more people will require loans to help keep their heads above water.
With regards to mortgages, this could influence how much money banks are willing to lend, especially as consumers will have less money to spend. Inflation is used to decide interest rates, and if one increases, the other will increase, and vice versa. If interest rates go up to counter the rising inflation, then anyone wanting a new mortgage will have to pay more interest than before the increase. You need to be careful as you could be living in a property that is worth significantly less than what they originally paid for it.
Your credit score generally reflects how reliable you are when it comes to repaying the money you have borrowed. This is based on how you have handled money previously – the higher your credit score, the more likely you are of being accepted for credit at a good rate. If you have a poor credit rating, then you might need to go through a mortgage broker to find a mortgage suitable for you. Mortgage brokers such as Trussle will generally speak to lenders on your behalf, to see if a mortgage can be achieved. This may mean that you have a higher interest rate or have to put down a bigger deposit than someone with a better credit rating. At the very least, the process has been simplified and you don’t need to go to each lender individually.
When people buy or sell houses, this is known as the housing market, especially as a house is the most valuable thing most people will ever own. The housing market is also very important for the economy, as when prices go up, homeowners are generally better off and more positive about this.
This means some people will borrow more money against the value of their home, either to spend on consumer goods, house renovation or to pay off other debts they may have. If house prices drop, then consumer spending is likely to go down, as people reduce their spending. If house prices drop, this may in turn affect how much a lender will offer you.
While there are a number of factors affecting mortgage rates, it’s definitely something to pay attention to even if you don’t plan on buying a house yet.