Obtain mortgage in advance?

strapenddave

I think I might be in the market for a mortgage of around £50k in about 6-9 months time and i am concerned that recent press releases suggest that interest rates may soon start to increase significantly. My current property is mortgage free and I would be looking to move up the housing ladder.
Is there any way that I could obtain the mortgage funds now at current rates even though I don't yet have a specific new property in mind and just hold onto the funds until I need them to move to a new property? I appreciate that I would probably have to start making mortgage payments in the meantime even before I have spent the funds but that's ok.

jamesd

Yes, you could do this with say a portable offset mortgage. While the money is in the offset account you wouldn't be paying interest on it. Even with a portable mortgage a lender isn't obliged to accept a request to port. The offset part isn't required, it's just to cut your costs.

I doubt that it's worth doing. Rates may eventually move up but lenders are becoming more competitive and that could well be more significant. Meanwhile you're adding the cost of at least one more valuation, say £150. A quarter percent increase in rate on a £50,000 mortgage costs £125 a year so just the extra valuation cost is going to cost you more than a year of 0.25% interest rate increase. Similar for legal costs.

A better approach may be to find a lender three to four months before purchasing and get a mortgage offer at that point. Offers are valid for some time, perhaps six months - check with the lender in advance - and that is binding on the lender provided the property meets their requirements.

Rates aren't going to go up substantially while the economic recovery remains uncertain. Six to nine months wouldn't be worrying me.