For first-time buyers, the dream of stepping onto the property ladder can feel elusive, especially with the ever-shifting landscape of rising interest rates. Understanding how these changes impact affordability and what you can do about it is crucial to keeping your home-buying plans on track.
What Rising Rates Really Mean
Interest rates dictate how much you’ll pay to borrow money from a lender. As rates climb, so do monthly mortgage repayments, meaning buyers can often borrow less for the same income. Even a small percentage increase can add hundreds of pounds to your monthly repayments, potentially altering your budget or the type of property you can afford.
How It Affects Affordability
Lenders conduct affordability checks to ensure you can manage repayments even if rates rise further. When rates are high, this test becomes more challenging, reducing the mortgage size offered. Consequently, some buyers may need a larger deposit or to reconsider their location, property type, or size.
Fixed or Variable? Choose Wisely
A fixed-rate mortgage locks in your payments for a set period, providing security against further rate increases. Conversely, variable or tracker mortgages fluctuate with base rate changes, meaning payments could rise or fall over time. Consider your risk tolerance and long-term plans before deciding.
Smart Strategies to Cope
Saving a larger deposit can mitigate the effects of higher rates, while improving your credit score can help you secure a better deal. Speaking to a mortgage broker is also beneficial, as they can compare lenders and products to find the best fit for your situation.
Rising interest rates may add complexity, but with preparation, clear priorities, and the right advice, your first home can still be within reach. If you're navigating this journey, we at Bond Residential are here to support you every step of the way.
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