At Crawford Mulholland, we understand that when buying a home, there are things that are important to know, things that as a grown up make you wonder why in school they taught you ‘Hooke’s Law of Elasticity’ or how to do ‘Quadratic Equations’ instead of useful things like ‘how to complete a tax return’ or ‘why you should have a pension’. When it comes to buying your house in Northern Ireland, we want to make sure that the process is simple, transparent and useful so this post helps explain Interest Rates and what you need to know.
What are interest rates?
Interest is the money you repay for borrowing money. This is what you agree to pay your lender in return for them lending you the money to buy your house. The rates are shown as a percentage (of the total amount you borrow) and are usually paid over the course of a year.
Your lender will state the interest rate they offer you and the duration of the term and you will either be on one of 2 types of mortgage-
– a fixed rate mortgage (which 57% of borrowers are on)
– a tracker mortgage (linked to the Bank of England Base Rate)
What are the differences in the types of mortgage?
A fixed rate mortgage means your mortgage payments and interest rates will remain the same for the duration of your deal (2 years, 5 years etc- this is different than the duration of your mortgage term). At the end of your deal, you will move to the Standard Variable Rate (SVR) for the remainder of your mortgage term. The SVR can usually be few percent above the Bank of England Base Rate, meaning you will move to having to pay considerably larger repayments each month. It is better to go back into another fixed deal, i.e. people come to see us and we shop around to find the best deal available for them.
If you are on a tracker mortgage, this means the interest rate you pay each month is linked to the Bank of England Base Rate. So if the Bank Of England increases interest rates – your payments increase. There are benefits to both as well as be drawbacks to both. As with the fixed rate mortgage, at the end of your deal, you too will default to the Standard Variable Rate.
So will the interest rates change?
No one knows exactly what will happen but the Bank of England Base rate was slashed to 0.5% in August 2009 and remained there for an unprecedented 7 years, then was cut again further to 0.25% in 2016.
In November 2017 as the market steadied, it was increased back to 0.5% and there is a very high chance that it will increase again soon so making wise decisions now could save you £1000s of pounds in the long run.
Which mortgage is best?
There a combination of factors to consider when choosing mortgage including things like employment status, interest only or repayment mortgages, the term you want to borrow the money over and many more. That is where we come in! As a local Belfast based mortgage broker, we help get you the best deal for you rather than try and get you to fit into a specific package.
So What Now?
-If your currently have a mortgage deal and it is coming to an end in the next 3-4 months, or your deal has already ended, we’d love to speak to you right away so we can help you find a deal that will take advantage of some of the great offers we have available and reduce the amount you have to overpay.
-If you are looking to buy your first home (or add to your portfolio), now is a fantastic time to get a great deal, get in touch to fund out what you can afford.
-If you are currently in a deal that is currently running, we may still be able to help you avoid the imminent interest rate hike.
For further details check out our FAQ Section or Click the button below.