Turmoil in the mortgage market sparked by rising interest rates and a spiraling pound pound has prompted a Jersey pundit to warn islanders to fix rates as soon as possible.
The chaos in UK markets has led to the withdrawal of more than 900 mortgage products, with Jersey mortgage adviser Peter Seymour saying the islanders are nearing the end of a fixed rate contract and those with fixed rates Variables should enter into a fixed rate agreement with their current lender as “even a 24-hour delay could make a difference” in their monthly payments.
Meanwhile, Santander International in Jersey said it was still offering fixed-rate mortgages to new and existing customers, but first-time buyers should expect to pay a third more than they would have at the beginning of this year.
Skipton International in Jersey confirmed that they are currently “reviewing” their mortgages, but there are no plans to take mortgages off at this time, even to new customers.
The cheapest five-year fixed rate offered by Barclays was 6.29% on September 27.
The pound fell to an all-time low (£1=$1.03) this week as markets spooked by the UK government’s recently announced mini-budget and indication from the Bank of England that which it will raise interest rates again in November.
Skipton International managing director Jim Coupe said: “Any decision we make will not be taken lightly, but will be taken to avoid further disruption to our customers. Customers with applications in progress are not affected by this.’
Mr Coupe added: “Following the Bank of England’s monetary policy meeting last week and the government’s subsequent mini-budget, we continue to see the markets unfold.”
“In response, Skipton International’s range of mortgage products is currently being reviewed.”
Santander International CEO James Pountney said: “We continue to support our customers, new and existing, by offering our full range of fixed rate mortgages. All mortgage offers are valid for three months, but first-time buyers can now expect their monthly repayments to be around a third more than they would have paid in January.
In such a volatile market, Mr Seymour of the Mortgage Shop said Jersey lenders were not making “gut” decisions while the situation was still “an emotional feast” that would stabilize in the long term.
He added: “Although this is a very worrying time for many people, no one knows how long this will last.” The Bank of England said it should only last a few years. It is cyclical and will settle.
“We have to remember that interest rates have been much higher in the past and the world hasn’t collapsed. People will adjust their spending in the short term – no expensive vacations, new cars or new kitchens and there will be more savings instead.
Mr Seymour said the lending scenario in Jersey was completely different to that in the UK, as house prices and wages were higher there. Islanders could borrow six or even seven times their income for a mortgage.
However, he added that it would be early buyers trying to get to the bottom rung of the real estate ladder who would be hit the hardest by rising interest rates.
“We’ve already seen first-time buyers start to pull out of the market over the past few weeks, so prices for one-bedroom properties will start to come down as demand drops,” he said.
The latest House Price Index showed the cost of buying a home in Jersey has continued to rise for most property types and the rate at which homes are selling is accelerating. However, it also showed a slight drop in average prices for three-bedroom homes, which appeared to reverse the trend with a slight drop in average prices.
This means the average price of three-bedroom homes sold in the last quarter was £853,000, £45,000 less than in the spring of this year.
The Bank of England raised the key rate by 0.5% to 2.25% last Thursday (the highest level for 14 years). He said he ‘wouldn’t hesitate’ to raise it further as the pound fell to a record low against the dollar, with some experts expecting it to hit 6% by April. next year as the institution aims to bring UK inflation down to 2%. The inflation rate recently rose to 10.1% and to 7.9% in Jersey.
PETER SEYMOUR (MORTGAGE SHOP) TIPS FOR JERSEY MORTGAGE CUSTOMERS
1. Secure your mortgage as soon as possible, staying with your current lender to save time, for 5 years (not 2 or 10 years) so you can plan ahead and have stability.
2. Don’t go for a tracker or variable rate because mortgage rates will continue to rise, so your mortgage payments will also rise, making planning difficult.
3. First-time home buyers should wait for the market to stabilize before taking out a mortgage, as the price of one-bedroom starter homes is likely to decline over the next few months.
INCREASE IN AVERAGE COSTS
The average £300,000 first-time buyer mortgage was £1,000 a month, now costs £1,400 and could reach £1,993 by mid-2023 (if rates rise to 7.35%).
The average mortgage for a £650,000 second buyer was £2,167 a month, now costs up to £3,924 a month and by mid-2023 could be as high as £4,318 (if rates rise to 7.35 %).