With the economy going into freefall and the housing market in chaos, Kwasi Kwarteng’s mini budget has done little to appease fears for buyers and lenders alike.

The Bank of England has stated that they “would not hesitate” to increase the interest base rates yet again in an attempt to protect the falling value of the pound. Unfortunately this will lead to the inevitable result for Mortgage lenders who predict that offering competitive interest rates to customers will be far too expensive.

With this is mind people have many questions regarding the future of the mortgage market and what it means for them. Today we answer a few of these questions.

Will my Lender Withdraw my Mortgage Offer?

This is a question paramount on every buyer’s mind who has already been offered a mortgage deal by their lender. In principal lenders will abide by the offer they have made according to most Brokers. So to answer the question, yes, lenders will honour any offer already agreed upon.

Unfortunately for buyers, first time and movers, who have not already made an application, they will find that offers available to them will be limited and significantly more expensive.

The previously good mortgage deals have been removed and when new offers make a re-appearance will be considerably less of a “deal” and markedly more expensive.

If your application for a good deal is complete then you are likely to be lucky enough to have secured a specific rate, however if it just “agreed in principal” the likelihood is that the rate offered is not binding and therefore can be withdrawn by the lender.

It is important, however, to note that is you are part way through a deal with fixed interest rate that the lender cannot change the rate until the deal expires.

Will My Home be Repossessed?

With many fixed rates coming to an end, and an almost certain increase in Monthly Mortgage Repayments, many homeowners are asking themselves if their homes could be repossessed. Although this is a possibility, the whole process of repossession is a lengthy one for lenders and one they will try to avoid.

It’s more likely that a lender will offer some sort of payment plan for those struggling with their monthly mortgage repayments.

If you are or feel you may in the near future not be able to meet your payment obligations, it is imperative that you seek help and advice. There are various charities such as Citizens Advice that are there to offer any support you may need.

What Support Can We Expect from the Government?

Following the pandemic we have become somewhat accustomed to the government handing out support in various ways, for example furlough and grants. Unfortunately this will not be the case for homeowners struggling to pay their mortgages.

Instead they will be doing what they can to get the economy back on track, although to date they have not been too successful in this endeavour.

Will Renters be Affected?

Well mostly, yes. If landlords find themselves paying higher buy-to-rent mortgage payments, they will have little choice but to pass at least some of these increased costs onto their tenants.

Another side effect of the market chaos is a shortage of rentable properties should landlords decide to sell up. With demand higher than supply an inevitable increase in rental rates will be unavoidable due to the increased competition.

Renters who were wishing to get their foot on the property ladder will most likely need to wait longer to buy due to first time mortgages being so expensive.

Why is the Bank of England Increasing Interest Rates?

The theory is that by increasing base rates people will be less likely to borrow and spend and more likely to save. This hopefully results in their being less demand for products and services which in turn will result in prices going down.

With inflation at 5 times its target rate the Bank of England is expected to keep increasing interest rates in order to get control over the spiralling inflation rate.

Although in theory this should work, it is a balancing act that needs to be executed well as we do not want the economy to slow down too much.

Do Mortgage Interest Rates Always Fluctuate?

Yes but we need to consider some factors such as that for the last decade interest rates have been relatively low. Now that rates are on the rise it has been a shock for many that even a small rise in rates has translated into quite significant rises in monthly payments. This is largely due to the amount buyers have borrowed due to high house prices and stagnant wages.

How will the Rise in Rates Affect my Mortgage?

The rise in base rates will result in mortgages becoming significantly more expensive. This will in turn have a negative effect on the housing market activity as buyers will be more hesitant to act now and will be more likely to be waiting to see what the future holds.

Should the rates stay high for a long period of time, mortgages will become unaffordable and house, many will sell, and house prices will inevitably decrease.