It’s common for clients to ask about the mortgage rates we can secure for them even before sharing their details. While understandable, this approach might not lead to the best outcome for you.
No adviser can responsibly quote rates without assessing your unique circumstances. Advisers who share rates upfront are often using generic figures to win your business, which may not apply to your situation. This can lead to disappointment or unexpected costs later.
The way lenders price the fixed rates they offer for new business is based on SWAP rates, which are driven by market conditions and sentiment. This makes mortgage rates inherently volatile, especially when SWAP rates change drastically.
Volatility in mortgage rates is not uncommon in the UK. While neither clients nor advisers can control the market, understanding what you can do in such a market is key to protecting yourself from rate fluctuations.
It’s common for clients to ask if they should wait for the next Bank of England’s Monetary Policy Committee (MPC) meeting before deciding on the mortgage rates available to them. The idea behind waiting is understandable, as many assume that the Bank of England’s base rate has a direct and immediate impact on mortgage rates. However, in most cases, the answer is no, and here’s why.
While the Bank of England’s MPC meets approximately every six weeks to review and decide what should happen to the base rate, this does not directly determine the mortgage rates that lenders offer for purchases, remortgages, or product transfers. Let’s explore why this is the case.
The base rate, set by the Bank of England, is a tool used to control inflation and manage economic stability. It influences the interest rates that banks pay to borrow money, but it’s just one of many factors that affect mortgage rates. Mortgage lenders set their rates based on several other considerations, with SWAP rates being one of the most critical factors.
SWAP rates are essentially contracts that banks and mortgage lenders use to manage the risk of future interest rate changes. When a lender offers a fixed-rate mortgage, they rely on SWAP rates to hedge against future changes in the cost of borrowing. In simple terms, a SWAP rate is a type of contract where two parties agree to exchange interest rate payments, usually switching from a variable rate to a fixed rate.
The important point here is that SWAP rates are not directly tied to the Bank of England’s base rate. Instead, they are influenced by the broader financial markets, which consider future economic expectations. SWAP rates can fluctuate independently of the base rate, driven by factors like market sentiment, inflation forecasts, and global economic conditions.
Unlike the more predictable base rate, SWAP rates are dynamic and can fluctuate daily. Here are some of the factors that influence SWAP rates:
Because mortgage rates are more closely linked to SWAP rates than the base rate, waiting for the next Bank of England decision is often unnecessary. By the time the MPC makes its announcement, lenders have usually already adjusted their mortgage rates based on broader economic forecasts. In many cases, the impact of the base rate change may be far less significant than expected.
The best approach is to secure the best available rate now, and if rates decrease before your mortgage completes, you can often switch to a lower rate without penalty. Here’s how it works:
If you don’t secure a rate now and rates increase, you could miss out on today’s lower rates. Once your application is submitted, most lenders will allow you to benefit from any rate reductions that happen before completion, without penalizing you if rates go up.
Many lenders also allow multiple changes during this period, including switching between products. For example, you could move from a two-year tracker to a five-year fixed-rate mortgage for more stability.
By securing the rate now, you protect yourself against potential rate increases while retaining the flexibility to benefit from rate reductions or product changes. In short, there’s no downside to locking in a rate today, and it ensures you don’t miss out on more competitive deals later.
If you choose to select a mortgage lender and product yourself, then comparison websites are useful for getting an overview of available mortgage rates on any given day. However, if you select a lender and product based solely on these results and apply for the mortgage directly, the responsibility of tracking rate changes falls entirely on you.
On the other hand, if you engage a mortgage adviser, you gain more than just a snapshot of the market.
Working with a mortgage adviser offers a proactive approach, ongoing market monitoring, and personalised advice—making sure you don’t miss out on better deals or make decisions based solely on the numbers at one point in time. This hands-on support helps ensure that your mortgage choice is optimal for your specific needs and future-proofed against changes in the market.
Help to Buy, while it lasted, was an effective scheme that enabled many homebuyers to get a foot on the property ladder, particularly in securing a new build home. It provided much-needed support by bridging the gap between savings and the actual cost of purchasing a property. However, now that the scheme has effectively closed, it’s time for many homeowners to consider their next steps.
While the Help to Buy equity loan acted as a good catalyst in helping homebuyers, it’s in the homeowners’ best interest to redeem this loan as soon as possible. Here are four key reasons why:
Some homeowners may argue that it’s beneficial to take advantage of the interest-free initial five-year period and delay redeeming the Help to Buy loan. There are even clients who have suggested waiting to see if property prices drop, which could theoretically justify paying interest on the loan after the six-year mark, as the lower property value would result in a reduced redemption amount.
However, this strategy comes with significant risks. As a homeowner, you typically own the majority share of the property, given that Help to Buy equity loans represent 20% of the property value (up to 40% in London). Naturally, you would want your property value to appreciate over time, rather than decrease. Relying on property prices to fall in the future is speculative and could backfire, especially in a generally rising market.
The sooner you can repay the Help to Buy loan, the sooner you’ll own 100% of the property’s equity and enjoy more flexibility without the restrictions imposed by the loan. Redeeming it early helps you avoid the uncertainty of property price fluctuations and eliminates the burden of interest payments after the five-year interest-free period.
You can repay the Help to Buy equity loan whenever you’re prepared, but there are specific rules about how repayments can be made. Unfortunately, you can’t make overpayments of your choice. Instead, you have two options: you can either redeem the loan in full or in part. For example, if you took a 20% equity loan, you can either repay the entire 20% or make a partial repayment of 10%.
Given the cost and time involved in redeeming the loan, it’s generally advisable to aim for full redemption where possible, as it simplifies the process and removes future financial obligations.
When you’re ready to redeem the loan, the first step is to get a property valuation from a local valuer with the relevant RICS (Royal Institution of Chartered Surveyors) qualification. You can search for a qualified surveyor near you by visiting the RICS Find a Surveyor website, where you can compare quotes from local professionals.
It’s important to make the valuer aware that the purpose of the valuation is to redeem your Help to Buy loan, as this ensures they understand the specific requirements. Also, remember that the valuation report is only valid for 3 months. Timing the valuation carefully is crucial to avoid the need for an additional valuation, which could add unnecessary costs.
The next step is to engage a solicitor to handle the legal aspects of redeeming your Help to Buy loan. Your solicitor will liaise with the Help to Buy agency to ensure the loan is repaid and the agency’s charge is released from the Land Registry. They will also manage all the compliance requirements involved in the process.
This should be a straightforward process, and your solicitor will guide you through each step, ensuring everything is handled correctly and in a timely manner
Once you have your valuation report and have appointed a solicitor, the next step is to apply to the Help to Buy agency to get your redemption value. This application requires you to submit the valuation report, and there is typically a fee associated with this process.
The agency will calculate the amount you need to repay based on the current market value of your home, as determined by your RICS valuation. Once you receive the redemption figure, your solicitor will proceed with finalizing the repayment.
You have several options to fund the repayment of your Help to Buy loan:
Properties usually have a valuation range, and it’s important to note that the redemption of the Help to Buy loan is typically based on the lower end of this range. However, if you’re applying for a remortgage or further advance, the lender may use the higher end of the valuation range. This can result in more attractive mortgage rates, as a higher property valuation improves your loan-to-value ratio, giving you better borrowing options.
A client purchased a home in 2020 for £370,000 with a 5% deposit and a 20% Help to Buy equity loan (£74,000), secured on a 2-year fixed mortgage product.
In 2022, when the fixed term ended, the property’s value had increased to £440,000. As a result, the client’s redemption figure for the Help to Buy loan increased to £82,000. The client did not have personal savings to cover the redemption, so we helped them raise the necessary funds through a remortgage.
The client incurred costs of £450 for the RICS valuation and £1,360 in solicitor fees (including disbursements). Despite these costs, the entire Help to Buy equity loan was successfully redeemed through the remortgage.
While the client had to repay a higher amount than they originally borrowed, they were able to fully redeem the loan and now own the property outright without any of the restrictions associated with the Help to Buy scheme.
Clients who purchased their first home in 2017 using a Help to Buy equity loan decided to redeem the loan in 2023, a year after they began paying interest on the equity loan.
Their mortgage was with Halifax, and in 2023, the indexed valuation used by Halifax stood at £630,000. We were able to use this higher valuation to raise the necessary funds for the mortgage, securing better rates for the client.
At the same time, the RICS valuation for the purpose of redeeming the Help to Buy loan came back at £590,000. The clients paid 20% of this lower valuation to redeem the equity loan, which worked in their favor.
Through this approach, we helped the clients achieve better mortgage rates based on the higher valuation while ensuring that the lower valuation was used to minimize the cost of redeeming the Help to Buy loan.
At Nachu Finance, we are committed to making the Help to Buy loan redemption process as simple and stress-free as possible. Whether you’re an existing client looking to repay your loan using your own savings or with the help of a mortgage, or a new client seeking to raise funds for loan redemption, we’re here to guide you every step of the way.
We can provide you with solicitor quotes from trusted legal firms we closely work with to ensure a smooth legal process. Additionally, we can offer advice on selecting the right local valuers to carry out your RICS valuation, ensuring you have the best professionals on your side.
With our experience and dedication, redeeming your Help to Buy loan is easier and more manageable with Nachu Finance.
Let’s talk about life insurance. You’ve probably already taken the important step of getting a policy to protect your loved ones, but have you thought about the benefits of placing it under a trust? If not, don’t worry—you’re not alone! Many people aren’t aware of this option, but it can make a world of difference when it comes to ensuring your family gets the most out of your policy. Here’s why you might want to consider it:
We all know life insurance is there to support your family after you’re gone, but wouldn’t it be great if they could get that support quickly and without hassle? By putting your policy under a trust, you’ve already sorted out ownership details ahead of time. This means that when the time comes, your loved ones only need to provide proof of your passing to claim the proceeds—no drawn-out legal processes required. This could mean your family gets the funds they need much faster, sometimes months sooner! Quick access to these funds can help cover immediate costs, like funeral expenses, or simply provide a financial cushion during a tough time.
Let’s face it—nobody likes taxes, especially when they reduce the inheritance you’ve worked hard to build for your loved ones. In the UK, for example, estates valued over a certain threshold can face an inheritance tax of up to 40%! Normally, life insurance payouts would be counted as part of your estate and could be subject to this hefty tax. But here’s the good news: if your policy is under a trust, the payout is usually kept outside your estate, which can save your family a big chunk of money.
And even if your estate still has to pay some inheritance tax, the payout from the trust can be a helpful way to cover that bill upfront—giving your family one less thing to worry about during an already difficult time.
One of the best things about setting up a trust for your life insurance is the control it gives you. You get to decide exactly who benefits from your policy and can even choose trusted individuals (called trustees) to make sure everything is managed according to your wishes. This means there’s no room for misunderstandings or disputes—just peace of mind knowing that your intentions will be honoured.
If the word “trust” makes you think of complicated legal processes and high costs, think again! Setting up a trust for your life insurance policy is often much simpler than people expect. Most insurance companies offer a variety of trusts tailored to different needs, and setting one up typically involves just a few straightforward steps—selecting the trust type, naming your beneficiaries and trustees, and getting the necessary signatures. Best of all, this process is usually free and can be done for both new and existing policies.
Taking out life insurance is a smart move for anyone looking to provide financial security for their loved ones. But why not take it a step further? By placing your life insurance under a trust, you’re not just protecting your family—you’re making sure they have easy access to the funds, keeping more of your money in their pockets, and ensuring your wishes are followed to the letter. It’s a simple step that can make a big difference, so why not consider it?
Investing in buy-to-let properties can be a fantastic way to generate steady rental income and enjoy potential capital growth. However, being a landlord in the UK isn’t just about sitting back and collecting rent. It comes with a fair share of responsibilities and legal obligations that require your attention. Recent cases, like that of Labour’s Jas Athwal, have shown the importance of staying on top of these requirements. Athwal received negative publicity for not meeting essential safety standards in his rental property, highlighting that neglecting these rules can lead to hefty fines, legal trouble, and damage to your reputation. But don’t worry—understanding these responsibilities can help you avoid such pitfalls and keep your rental business running smoothly!
To help you stay on the right track, here’s a handy list of the key requirements every UK landlord should be aware of:
Many landlords hire letting agents to help manage their properties, which can be a great way to lighten the load. Letting agents can handle tasks like tenant screening, rent collection, and property maintenance. However, it’s essential to remember that even if you use a letting agent, you, as the landlord, are ultimately responsible for ensuring that all legal obligations are met. If a letting agent fails to comply with regulations, it’s still the landlord who could face fines or legal action. So, make sure to stay involved and keep an eye on compliance to protect your investment.
Given the complexities and constant changes in rental regulations, landlords should adopt a proactive approach to property management. This means regularly reviewing legal requirements, staying updated with any new legislation, and conducting routine property inspections. Engaging with professionals, like property managers, solicitors, or letting agents, can provide valuable support in navigating the regulatory landscape. By doing so, you can ensure your property complies with all requirements, protect your investment, and maintain positive relationships with your tenants.
While buy-to-let investments can be financially rewarding, they come with a set of responsibilities that cannot be ignored. By staying on top of the legal requirements and maintaining high standards of property management, landlords can avoid pitfalls like fines, legal trouble, and reputational damage. Remember, being a landlord is more than just a financial investment—it’s about creating a safe and welcoming home for your tenants. So, take a proactive approach, keep up with regulations, and you’ll be well on your way to a successful and hassle-free experience in the rental market.
First off, congratulations again on your new home! Wishing you nothing but happiness as you settle into this exciting chapter. I hope your new house becomes a place where all your dreams come true, filled with countless wonderful memories. Moving into a new home can feel like a whirlwind, but it’s also the start of something special. May it bring you everything you’ve hoped for and more.
While you’re getting comfortable, I’d like to remind you of a few next steps and good practices. Apologies if any of it is a repeat of what you already knew but wanted to give you a check list of some sort.
Now that the purchase is complete, the Land Registry will update the name of the new owners, which includes your mortgage lender. Your solicitors will handle this process, typically submitting the necessary updates shortly after completion. However, it’s important to note that the Land Registry can take anywhere from 8 weeks to 4 months to process these changes. (Correct as of Sep 2024)
Once the update is completed, your solicitors should send you a copy of the updated Land Registry document. If you don’t hear anything within 4 months, it’s a good idea to reach out to your solicitor to follow up. Alternatively, you can also download the updated document directly from the Land Registry’s website here
The Land Registry offers a useful service that allows you to receive email updates on any applications submitted for your property. It’s a simple process to register, and you can monitor up to 10 properties with one account. This service helps to safeguard your property from fraud and keeps you informed of any changes. You can register for it here
It’s important to set up all your utility bills, including gas, water, electricity, and council tax. I recommend reaching out to the providers as soon as possible to confirm the date you took responsibility for the property and provide any meter readings. As a best practice, try to have this sorted within the first two weeks of moving in to avoid any surprises later on.
Ensuring that your address is updated across all important records is key for maintaining a good credit score. Any prospective lender will expect to see that all your address is registered to one address, including banks, credit cards, the electoral roll, your employer, HMRC, insurance providers (which would include your life insurance, health insurance, car insurance, home insurance etc) , and any other financial institutions.
Don’t forget to update your details with the DVLA if you own a car or need to change the address on your driving licence. Failing to notify the DVLA can result in hefty fines, so it’s important to make this a priority. Similarly, your TV license needs to be updated to reflect your new address, as failing to do so can also result in fines.
Even with the most thorough effort, it’s hard to avoid some post still going to your old address. This is where the Royal Mail redirection service can be incredibly helpful. I highly recommend using this service to catch any stray mail during your transition. You can easily set it up here
As a best practice, it’s recommended to change the lock barrels on all security doors in a pre-owned home. Since the property was previously owned and used by someone else, there’s always a chance that more keys exist beyond the set you’ve received. By changing the barrels, you ensure that no one else has access to your home. The good news is that you don’t need to change the entire lock; barrels can easily be purchased online or in stores like B&Q, Wickes, and Selco.
Most lender will normally allow you to make overpayments on your mortgage without incurring early repayment charges. You can usually overpay up to 10% of the mortgage each year / calendar year. Since your mortgage interest is calculated daily, any overpayment will immediately reduce the interest charged from the next day onward.
Overpayments can be made at your convenience, typically through online or phone banking. Before making your first overpayment, I suggest contacting your lender to fully understand their process. Once you make an overpayment, you’ll normally have the option to either reduce your monthly payments or shorten your mortgage term. If your goal is to pay off the mortgage sooner, you may want to opt for reducing the term. During your call, you can request that this preference applies to both your first and future overpayments.
Contact your lender to understand how their overpayment works.
Although securing a mortgage is often the most time-consuming part of buying a home, it’s important to revisit your mortgage closer to the end of your fixed term—usually 3 to 6 months before it expires. At that point, we can review your options based on your current circumstances, requirements, and the state of the mortgage market, comparing deals from both your existing lender and potential new ones.
A remortgage is significantly easier than securing a mortgage for a new purchase. If staying with your current lender turns out to be the best option, the process can be quite fast and simple. At Nachu Finance, we don’t charge any fees for a product transfer with the same lender, making the transition even smoother.
Reviewing your options no later than 3 months before your fixed term ends will give you ample time for a thorough evaluation. At Nachu Finance, we aim to send you a reminder email 6 months before your fixed rate ends to ensure you’re prepared.
Once Again, Good Luck!
