Capital Private Finance shares expert perspectives and tailored advice in this insightful Q&A, providing a comprehensive guide to help you navigate the ever-changing landscape of the housing market.
Whether you're a first-time homebuyer, a seasoned investor, or someone considering releasing equity, this article offers valuable insights to inform your financial decisions.
We delve into crucial topics such as the impact of deposit size on saving money, the current trajectory of interest rates, the dynamic nature of property prices, the perennial debate between fixed and variable mortgages, possibilities of releasing equity for gifting or improvements, and the viability of making profits through Buy-to-Let investments.
1. Will a larger deposit save me money?
Yes, and this will be two-fold. Firstly, lenders have rate brackets whereby the LTV (Loan to Value: level of deposit against house value) determines which bracket a client falls into and therefore which products they are eligible for. The larger the deposit the increased security for the lender who will then offer lower rates which will be reflected in a client’s monthly payments being lower. Secondly, we should remember a mortgage is a form of secure debt often over a considerable number of years. The smaller the lending amount due to an increased deposit would mean in the longer term the overall amount of interest to be paid back will be less.
2. Are rates coming down?
Yes, at the point of writing rates are coming down. That is not necessarily just because the Bank of England (BOE) rate has stabilised. SWAPs rates internationally have reduced which determine what future money can be bought at by lenders, this has fuelled their confidence and led to increased competition to encourage more lending before year end.
3. What is happening to property prices?
Property prices are reducing but not at the level forecast at the start of the year. There are contradictory reports by major lenders such as Halifax and Nationwide which show disparity across the country dependent on location. Whilst there may be mixed feelings and predictions on house prices, the speed at which they have been falling does seem to have slowed. Our view is at most prices may only drop by another couple of % at most by year end.
4. Is it better to be on a fixed or variable? If ‘fixed’ is a 2 year or 5 year better?
There is no definitive answer to this. Capital Private Finance provide tailored advice based on a clients’ individual circumstance. Whilst Fixed mortgages provide stability in mortgage payments for the fixed period, often Variable rates can be cheaper initially and provide a borrower more flexibility such as a greater over payment facility without penalty. However, whilst being initially cheaper and more flexible, variable rate products can increase at a moments notice leaving a client exposed. If security is the priority for the client, then a fixed option will likely be a better option. Subject to a client’s plans over the coming years we will be able to advise if fixing for a longer or shorter period is most suitable.
5. Can I release money from my property to gift to family after a certain age?
Yes, there may be multiple options available to clients looking to release equity from their existing property to gift to family or for alternative reasons such as home improvements. Once a client is of a certain age traditional lending terms can start to become restrictive which may heavily impact monthly repayment amounts. In these instances, our expert advisers can then provide specialist advice and look at lending options such as Equity Release/ Later Life lending which may be more suitable and manageable for the client.
6. Can I still make money investing in BTL?
In one word, absolutely! There are traditionally two methods of making money through property investment, either through rental income or capital appreciation. Whilst rental incomes are at their highest level, some landlords are not fully benefiting from this as recent rising mortgage costs have squeezed these profits. Likewise, with property prices marginally reducing this year, capital appreciation has stagnated. However, mortgage rates are now thankfully reducing meaning monthly profit will start to become more noticeable again. Furthermore, property investment tends to be a longer-term investment strategy. Historically, the UK property market fluctuates in cycles, with many experts predicting the market due to rise again in the upcoming years.
Author:
Amit Gupta
Regional Financial Services Manager
Capital Private Finance
