Buying Your Dream Home in 2022: Mortgage Trends and Tips for the New Year 

 

2022 is now just around the corner – and the thought ‘new year, new home’ is sure to be a popular one! But what will 2022 hold for mortgages? With interest rates rising and inflation soaring, it’s no wonder prospective buyers are feeling a little nervy. The good news is that, with some preparation and guidance, buying your dream home over the next year doesn’t need to be a pipe dream. 

 

On 16th December 2021, the UK saw its first Bank of England base rate hike in almost three years, with a rise from 0.1% to 0.25%. Though this change is fairly minimal, it’s widely predicted that further increases will be necessary in the New Year to combat the effects of surging inflation; which, ultimately, will impact savings, pensions, the cost of borrowing, and – of course – mortgages. Read on to find out what you can expect for mortgages in 2022 – and our top tips for securing the best deal. 

 

Mortgages in 2022: Predicted Trends 

 

If the recent change to base rate is – as many experts predict – the start of a trend, it will mean that certain mortgage repayments are likely to increase throughout 2022. Those with variable products (such as tracker mortgages) will feel the impact immediately, as these follow the Bank of England base rates for a defined period of time: meaning that, when interest rates rise, so do monthly repayments. However, many homeowners in the UK are committed to fixed-term mortgages, which would protect them from any immediate price hikes. Even so, the day-to-day cost of living is set to continue to increase, as is the cost of borrowing – meaning that many people could be feeling ‘squeezed’ financially. 

 

It’s not all doom and gloom, though: there’s plenty of good news for prospective homeowners. For example, low-cost deposits and high loan-to-value products are likely to be widely available throughout 2022; furthermore, it’s been predicted that the surge in house prices might finally show signs of slowing down. According to Halifax, whilst prices increased by a whopping 8 per cent in 2021, this could reduce to just 1 per cent in 2022. Factors such as the rise in interest rates and increased pressure on household budgets (exacerbated by the withdrawal of Covid support measures) will contribute to this lull, which may be welcome news to buyers who are not dependent on the sale of a property to make a purchase (such as first-time buyers). 

 

Tips for Getting a Mortgage in 2022 

 

1. Check Credit Reports 

Ah, the fateful credit score: a topic we’ve covered more than once before, but which remains an important one, particularly when it comes to mortgages. As with any type of credit, it’s vital to persuade lenders of your attractiveness as a candidate; and, as part of their assessment procedures, they’ll want to evaluate your credit history. 

 

Credit reports draw on a range of data to build up a profile of your money management – anything from credit cards and loans to utility bills. Our advice is that you check your reports early and carefully. A poor credit score could affect your chances, and, what’s more, there’s the chance some of the information contained in your report could be wrong (you’ll want to correct any errors or discrepancies as soon as possible to increase your chances of securing the best mortgage). For more information about credit scoring, check out our helpful blog: ‘Six Easy Ways to Improve Your Credit Score’

 

2. Don’t apply for credit – and try to be frugal 

 

If at all possible, it’s highly recommended that you don’t apply for any other credit – such as a personal loan – at least three to six months before getting a mortgage. The reason for this is that each time you apply for certain products (such as an overdraft or credit card, or even a mobile phone contract), a ‘footprint’ is left on your credit report, which is available for other lenders to see. The more credit applications you’ve made within a short space of time, the more likely it is to appear as if you’re struggling financially or unable to manage your finances; and this, unfortunately, will diminish your attractiveness as a candidate for a mortgage. 

 

In addition, it’s worth cutting back on your spending in the months before you apply for a mortgage. Since 2014, lenders have been required to assess whether a prospective borrower would still be able to afford their mortgage if – during the term – rates rose significantly. This assessment procedure, known as the affordability test or revision rate, ‘stress tests’ borrowers to make sure that they could afford to make repayments in line with the lender’s higher standard variable rate of interest plus three per cent. Living frugally for a certain period of time will ensure that your bank statements (which are now often requested by lenders in addition to payslips, tax returns, and other supporting documentation) look as healthy as possible. 

 

3. Get started early 

 

We highly recommend connecting with a specialist mortgage provider – like Cherry Godfrey – before putting in an offer on a home you like. We’ll work with you to ensure you get a realistic mortgage-in-principle. This document, which confirms the amount your lender is prepared to offer you, not only reassures estate agents and buyers that you are a serious prospect, but also (helpfully) confirms what you can (and cannot) afford.  

 

Whether you’re a first-time buyer or a landlord with a portfolio, Cherry Godfrey are here to guide you to the best deal: with residential mortgages available up to the age of 80; longer-fixed rates available to protect yourself against future interest rate rises, as well as 2 year, 5 year and lifetime trackers rates for increased flexibility; and the ability to borrow up to six times your salary as standard.  

 

Changes are on the way in 2022 and this will affect the mortgage market. Cherry Godfrey’s expert team are proud to take a holistic view of all candidates, working closely with you to assess all possible options and find the very best product to suit your individual needs – whatever the future holds.