When to lock in mortgage rates, now or later this year or early next year???

JK4158

Hi I and my partner are FTB and we are killing ourselves thinking about this!

We are currently renting and the tenancy expires in Feb next year. So ideally we want to start making offers from later this summer (assuming it will take ~6mths to completion).
We talked to a few brokers: one is recommending we wait until end of this year or early next year to lock mortgage in. He is saying the rates are crazy now but will surely go down a bit. But then this means we may need to extend renting for 3-6mths more beyond Feb. 

Adding to the complication, I am on a skilled worker visa and but can get ILR (residency) in Oct this year. The brokers told me I can only access Natwest or Halifax for 90% LTV on a visa. but can have more options after I get the residency. They said the rates are unlikely better but I could prob get more flexibility in terms from other lenders.

So my question is what would be the best option for us:

Option 1. Lock in a rate NOW with a provisional property (we don't have one yet but like just a random one) for 6mths and switch the property later? This means we will need to submit an application to Natwest (we understand they are flexible with switch of property) as we can only choose between Natwest and Halifax with my visa situation and Halifax won't allow property switch

Option 2. Wait until we find a place we like and lock in later this year after October when I get the residency

Option 3. Extend the rent 3-6 more months and wait out until early next year to start viewings and mortage lock in

I know no one has a crystal ball but would appreciate some perspectives as we are FTBs.

Thank you!

KSS1991

You can't lock in a rate with 'random' property. So the whole thinking is wrong. What you can do though if you find THE house you want to buy is take a mortgage offer with a tracker which usually allows you to switch with no penalties and once the rates go down i.e. next year switch to a cheaper fixed deal. Fixing now would be foolish in my opinion

Newbie_John

I'd go for option 4) Wait a year for this madness to calm down, and then start looking - in a year time either rates will go down or properties values will go down. Your residency status will be better, possibly higher deposit etc.

RelievedSheff

Option 1 is a no go. You can't get a mortgage offer (which will lock in a rate) on any random property. It has to be one you are buying. A mortgage in principle does not lock in a rate. It has to be a full application.

simon_or

Option 1 - not an option as the bank will need to do a valuation of the property which (more likely than not) will need access to the property. And even if you did get an offer, it depends on the specific bank's policy whether you can change the property or not and it will expire, usually 6 months. So to summarise you will need to have an offer accepted on a specific property before you can apply for a mortgage.

If you can access Halifax and NatWest on a visa then any gain in rates by having access to the whole market is probably marginal. If you want to maximise the loan size then yes it would be worth waiting for ILR. But if you're borrowing well within your capacity then ILR doesn't matter as much.

It's hard to time the market. Right now there are less buyers out there so you might be able to get keen price though you'll pay a higher rate.

If/when it's clear that rates are going down, a lot of buyers will flood back into the market and you may end up paying more for the same property simply because of more competition.

Swings and roundabouts.

KSS1991

simon_or said:

Option 1 - not an option as the bank will need to do a valuation of the property which (more likely than not) will need access to the property. And even if you did get an offer, it depends on the specific bank's policy whether you can change the property or not and it will expire, usually 6 months. So to summarise you will need to have an offer accepted on a specific property before you can apply for a mortgage.

If you can access Halifax and NatWest on a visa then any gain in rates by having access to the whole market is probably marginal. If you want to maximise the loan size then yes it would be worth waiting for ILR. But if you're borrowing well within your capacity then ILR doesn't matter as much.

It's hard to time the market. Right now there are less buyers out there so you might be able to get keen price though you'll pay a higher rate.

If/when it's clear that rates are going down, a lot of buyers will flood back into the market and you may end up paying more for the same property simply because of more competition.

Swings and roundabouts.

Totally agree. We've been trying to buy for over a year, last summer we couldnt even get into viewings and houses were flying off shelves within hours of being listed on rightmove! There were bidding wars and people bought anything and everything for 10-20 even 30% over asking!!! Now this year we finally managed to get viewings, found a wonderful house, viewed twice with no rush and negotiated 8% LESS the asking price. We will be paying more interest for now, yes, but overall got a better house for less money / stress / bidding wars etc. To me it makes sense paying less for the actual house as interest rates will rise and fall in the next 30 years

RedFraggle

Is option 1 no longer available with Nationwide if via a broker?
You could reserve a product for 90 days at DIP stage. 

https://www.nationwide-intermediary.co.uk/products/reserving-a-product

I appreciate the OP maybe can't use Nationwide but they do/did offer that

jj_43

Why the rush? FTB for the last ten years have been hesitant, now they seem happy to jump in, even when affordability now is worse or not ready to buy. Why now?

simon_or

RedFraggle said:

Is option 1 no longer available with Nationwide if via a broker?
You could reserve a product for 90 days at DIP stage. 

https://www.nationwide-intermediary.co.uk/products/reserving-a-product

I appreciate the OP maybe can't use Nationwide but they do/did offer that

Oh yes, I've heard that mentioned by the brokers on here. Apparently you can lock in a rate with an Agreement In Principle for 90 days.

simon_or

jj_43 said:

Why the rush? FTB for the last ten years have been hesitant, now they seem happy to jump in, even when affordability now is worse or not ready to buy. Why now?

There could be so many reasons for someone to buy a certain point in time rather than a different point in time - starting a family, terrible rental market, want a home that they can work on, moving to an area where rental choice is poor, etc.

As long as you can borrow what you need to buy the kind of property you need and you can afford the monthly payment, then whether the current interest rate is 5% or 4% or 6% is unlikely to be a huge deciding factor.

Sarah1Mitty2

Newbie_John said:

I'd go for option 4) Wait a year for this madness to calm down, and then start looking - in a year time either rates will go down or properties values will go down. Your residency status will be better, possibly higher deposit etc.

Yep, wait for prices to go down and then see what rates you can get.