It’s no secret that the UK and much of the world are currently in the midst of a cost of living crisis. With the base rate increasing to 5% and the cost of food, energy and more increasing, it has become incredibly harder for first time buyers to save for a mortgage.
With soaring mortgage rates and a challenging housing market, many individuals are facing financial obstacles when it comes to purchasing their dream home. In this article we will provide valuable strategies and options on how to navigate your finances, saving for a mortgage, through these uncertain times.
Whether you’re looking for tips on cutting expenses or need assistance in calculating your mortgage payments, our team of mortgage advisors at The Levels Financial will help to provide you with the knowledge and tools necessary to overcome financial challenges and achieve your goal of saving for a mortgage.
- Why Are Mortgage Rates Rising?
- How Long Will Mortgage Rates Stay High?
- How To Save For A Mortgage In The Cost Of Living Crisis?
- Choose The Levels Financial For Your Cost Of Living Mortgage Needs
Why Are Mortgage Rates Rising?
One of the main reasons behind the rise in mortgage rates is the overall increase in interest rates set by The Bank Of England. When interest rates go up, borrowing costs for lenders also increase, which are then often passed to the borrowers in the form of higher mortgage rates. Additionally, market conditions such as inflation and economic growth can also impact mortgage rates.
At The Levels Financial, we believe it is crucial for our team of knowledgeable mortgage advisors to always be up to date with all of the latest financial news and updates. This means we can always have the most up to date information and advice to pass onto our clients.
When applying for a mortgage, it’s important to consider that rising mortgage rates can directly affect your ability to save for a home. Higher interest rates equal higher monthly payments, making it more challenging to set aside money for your initial deposit or other expenses related to buying a house (stamp duty, solicitor fees and insurance).
Saving for a mortgage during the cost of living crisis may require you to adjust your budget and find ways to cut back on other expenses in order to compensate for the increased cost of borrowing. But don’t worry, as we are here to help and have helped 100s of clients find the right mortgage to suit their needs and our experience will be able to help you as well.
For more information, ee recently answered this question in a recent blog post,’base rate increased to 5% – what this means for you’ and in our blog post, ‘March’s base rate increase and what it means for you’.
How Long Will Mortgage Rates Stay High?
For home owners and potential buyers, the last few years must seem like a relentless surge in mortgage rates. Unfortunately there seems to be no light on the horizon for the increasing rates, with financial advisors such as Money to the Masses and Resolution Finances warning that mortgage rates are expected to peak at nearly 6% in 2024.
In this challenging environment, it is crucial for homebuyers and potential homeowners alike to navigate these turbulent waters wisely. Here are some key considerations amidst high mortgage rates:
- Stay informed – keep an eye on announcements from the Bank of England regarding changes in interest rates and how they might affect mortgage rates. Knowing what your benchmarks and targets are will help you in the future.
- Budget carefully – with higher borrowing costs, it becomes even more important to budget effectively and allocate funds towards saving for your deposit or meeting monthly repayments.
- Explore alternative options – consider exploring schemes such as shared ownership or opting for a buy to let mortgage, so you can buy a new home while keeping your current property as rental income could help offset some of the financial strain.
- Seek professional advice – our team of mortgage advisors can provide invaluable guidance in finding the best deals to suit you.
How To Save For A Mortgage In The Cost Of Living Crisis?
We all know that saving up for a deposit for a home in the UK can be a daunting task, with the financial goalposts constantly moving and the rise in costs across every aspect of living in the UK. At The Levels Financial, we are passionate about pairing our clients with their dream homes as efficiently as possible and helping them find the right mortgage rate for them.
We work closely with over 90 lenders and 1000s of mortgage rates which is why we pride ourselves on being able to find the best mortgage rate to suit each of our clients. However, to get to that point, it is important to first secure your initial deposit on your dream home.
With proper planning and discipline, it is still possible to save for a mortgage. Here are our top tips on how best to save for a mortgage in the cost of living crisis:
Create A Budget
The first step into regular savings is to start by creating a budget that includes all of your monthly expenses and income. Look for areas where you can cut back or make adjustments to free up additional funds that can be put towards saving for a down payment. This could mean reducing spending on non-essential items or finding ways to lower fixed costs like utility bills.
Set Up A Direct Debit
Treat your savings like any other outgoing bill. Once you’ve organised your budget and have figured out how much you can realistically you can save each month. It’s recommended to create a dedicated savings account solely for your mortgage, then set up a direct transfer each month of the dedicated amount.
By treating this savings account as an obligation rather than an option, you will ensure that you consistently contribute towards your goal. Ensuring that the money goes out on the same
Open A Lifetime ISA
While the Help-To-Buy ISA is no longer available (unless you already have one opened then that can be continued to be paid into until 2029, all funds must be removed by 2030) then you may want to look into a LifeTime Isa.
A LifeTime ISA is a flexible and affordable way to invest in either your first home or later on life. Please note LifeTime ISAs can only be cashed when buying your first home or for your retirement pension.
A LifeTime ISA is a great way to save as they come with the following benefits:
- Your money will be able to increase tax free
- The government will match your savings by 25% each year, worth up to £1000
- You can set your ISA up as cash or to invest in the stock market
- You will be unable to remove or touch the money until you purchase your first home, so no risk of accidentally spending it
Increase Your Income
Additionally, explore potential avenues for increasing your income. This could involve taking on a part-time job or freelance work, renting out spare rooms in your current property, or starting a small side business. The extra income generated from these endeavours can be directly allocated towards building up your mortgage savings.
Remember that saving for a mortgage is not just about cutting back on expenses; it’s also crucial to maximise the growth potential of your savings through investments. Consult with a financial advisor to explore investment options that align with your risk tolerance and time horizon.
Choose The Levels Financial For Your Cost Of Living Mortgage Needs
At The Levels Financial, we believe that everyone deserves the opportunity to become homeowners. With our team of experienced mortgage advisors at The Levels Financial, you’ll have expert guidance and support as you navigate the exciting journey towards becoming a homeowner. When it comes to homeownership, we recognise that every individual has unique needs and circumstances and will work closely with you to develop a personalised plan that fits your income and financial goals.
Our award-winning advisors are well-versed in the various programs available for first-time homebuyers, including government-backed loans and down payment assistance programs. They can guide you through the application process for these programs, ensuring that you meet all eligibility requirements.
For more information, or to book your free initial consultation, please contact our team today on admin@thelevelsfinancial.co.uk or call us at 01458 772 040.
Important information:
If you do not keep up with your mortgage repayments your home may be repossessed.
A fee may be included for mortgage advice. The actual mortgage amount you pay will differ depending on your circumstances. Fees can be up to 1%, but typically a fee is 0.3% of the borrowed amount.
