If you will need a new mortgage in 2023, you will need to be prepared and proactive. If you’ve had your current mortgage for more than a year or so – or you’re new to the mortgage market – you’re likely to find that things have changed significantly in recent months.
Here, you’ll find five key pieces of practical advice if you’re:
- Coming to the end of your fixed-rate deal and looking for a new one
- Moving home
- A first-time buyer taking out your first mortgage.
From being prepared to speaking to an expert in a fast-moving market, here are five ways you can be proactive when it comes to getting the right mortgage deal for you.
1. Understand your current position
Your first step should be to understand your current position. This is particularly relevant if you already have a mortgage.
Look at your paperwork and establish when your current mortgage deal comes to an end. The BBC reports that around 4 million UK households will face higher mortgage payments in 2023, with a further 2 million seeing higher costs by 2025. Within three years, 70% of mortgage holders would see their payments increase.
If your deal ends in 2023, you should start planning now – read on for more tips.
If your deal ends in 2024 or later, make sure you diarise to act at least six months before your deal comes to an end.
If you’re planning to move home in 2023, you’ll also need to know when your current deal expires. If it ends after you plan to move, you may face early repayment charges if you repay your mortgage now. So, you may need to speak to your current broker or lender about “porting” your deal onto the new property.
2. Start early
Switching your mortgage to benefit from a better deal is relatively straightforward, although it can take time to complete all the paperwork and conclude the relevant valuations, underwriting, and legal work.
So, start early.
Many mortgage offers are valid for six months so it’s possible to lock in a rate early, and ensure the transaction concludes immediately after your existing deal ends. This can help you to avoid excess interest costs by languishing on your lender’s standard variable rate (SVR) while the remortgage progresses.
It’s the same if you are buying a house in 2023. Get your mortgage agreed nice and early, so you can proceed quickly once you find the home you want to buy. It can put you in a great position in a competitive housing market.
3. Get your paperwork in order
Following on from the point above, it’s important that you’re prepared when it comes to applying for your mortgage. Lenders will likely want to see proof of earnings, bank statements, and ID – and proof of your deposit if you’re buying a home.
Getting your bank statements in good shape six months before your application can help demonstrate affordability. An underwriter will likely look at these closely, so payments to betting companies or payday lenders, or unauthorised overdraft charges, are likely to hinder your chances of obtaining the loan you need.
Make sure you’re prepared with:
- Six months’ payslips, and evidence of any other bonuses or commission
- Three years’ accounts if you’re self-employed (or as many accounts as you have) along with your SA302 forms and tax year overviews (from HMRC) for the past two or three years
- Six months’ personal (and business, if applicable) bank statements
- Copies of your contract (if you’re a contractor)
- Proof of ID (passport or driving licence) and proof of your address (utility bills or similar)
- Proof of your deposit (if you are buying a property).
Having all these documents to hand can help to smooth the process and enables a lender to make an informed decision.
4. Speak to an expert
With thousands of mortgages available from dozens of lenders, finding the right deal for you can be a challenge. As well as finding a competitive interest rate, you also have to find a lender who is prepared to agree the mortgage you want based on your specific circumstances.
This can be tricky if:
- You’re self-employed, a director of a company, or a contractor
- Your income is from a range of sources, or irregular
- You’re a foreign national
- You want a “large loan”, typically £500,000 or more
- You have experienced credit issues in the past.
Working with an experienced mortgage broker can help you to navigate the market. For example, we can talk to lenders on your behalf to determine whether they will agree the loan you need. We can also access many lenders that you wouldn’t be able to speak to directly.
Furthermore, securing your chosen mortgage deal can also be tough in a fast-moving market. Mortgage Solutions reports that the average mortgage deal is now available for just 15 days, meaning it could well have been withdrawn by the time you come to make your application.
We can secure a particular fixed- or tracker-rate deal for you, helping you to secure the deal you want before it is withdrawn or repriced.
5. Start planning for a rise in repayments
If you’re coming to the end of a deal, or you’re buying a home in 2023, your repayments are likely to be more than you anticipate.
Interest rates have risen 10 times since December 2021, meaning mortgages have become more expensive. For example, Financial Reporter says that the majority of fixed-rate mortgages in the UK (57%) coming up for renewal in 2023 are fixed at interest rates below 2%.
Compare this to the table below, which shows the average cost of two- and five-year fixed-rate mortgages between December 2021 and February 2023.
Source: BBC
Using the Altura mortgage calculator, if the interest rate on a £300,000 mortgage increases from 2% to 5%, assuming a 25-year capital and interest (repayment) mortgage, the monthly mortgage repayment would rise by £482, from £1,272 to £1,754.
So, whatever your situation, you need to budget for higher mortgage repayments in 2023.
Get in touch
If you need a new mortgage in 2023, we can help. We work closely with dozens of the leading lenders to assist you in getting the mortgage you need at the most competitive rate.
Please get in touch to find out more. Email [email protected] or call us on +44 (0) 20 3411 0079.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
