Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in, and we will get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at money@theipaper.com.
Question: I’m a first-time buyer looking to buy a house for £250,000 and I have a £25,000 deposit. I’ve already put an offer in, but the sellers are away and the estate agent says I probably won’t hear anything until next week. I’m worried because mortgage rates seem to be going up all the time and every day I wait feels as though it could make the mortgage more expensive. Is there any way I can lock in a mortgage deal now, before the sellers have accepted my offer?
Answer: In most cases, you need the seller to accept your offer before you can submit a full mortgage application against the property, but there is plenty you can do now to avoid losing time once they come back to you.
On a £250,000 purchase with a £25,000 deposit, you would need to borrow £225,000. That puts you at 90 per cent loan-to-value, so the mortgage available will depend on your income, affordability and credit profile as well as the property itself.
If you have not already done so, get a decision in principle in place. It gives you an indication of how much a lender may be prepared to lend and shows the estate agent that you have already dealt with the first part of the mortgage process.
What it does not normally do is secure a mortgage rate. Products can be withdrawn or repriced between getting a decision in principle and submitting the full application, which is why a week can feel much longer when rates are moving.
There is at least one useful exception worth knowing about. Nationwide currently allows brokers to reserve a product after completing a decision in principle without submitting the full mortgage application. If a mortgage offer is issued within 90 days of the reservation, the reserved rate is honoured even if rates change in the meantime.
That should not be the reason you choose Nationwide over another lender. The mortgage still needs to suit your circumstances, and you need to meet the lender’s criteria. But where that option works for you, it could provide some protection while you wait for the seller to respond.
The fear of rates rising should not push you into paying more for the property either. Adding several thousand pounds to your offer simply to try to get the seller to agree more quickly could easily cost more than a change in mortgage rate would have done. Work out what the property is worth to you and stick to that number.
There are other things worth getting moving while you wait. Choose your conveyancer now and have their details ready for the estate agent. Once your offer is accepted, the memorandum of sale can be issued without waiting for you to appoint someone to handle the legal work.
Get your mortgage paperwork together as well. Make sure you can evidence the £25,000 deposit and have your payslips, bank statements and details of any loans, credit cards or other commitments ready.
If any of the deposit is being gifted, tell your broker and conveyancer now because there will usually be additional checks and paperwork.
A broker can work through which lenders and products fit your circumstances while you wait. If the offer is accepted next week, they will check the market again that day because mortgage pricing can change quickly and the deal that looked best when you made the offer may no longer be the one to apply for.
With your conveyancer already appointed and your mortgage documents prepared, both the legal work and mortgage application can then start without unnecessary delay.
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