Interest Rates Rising Again? The Oil Crisis Impact on Mortgages

Impact of Rising Oil Prices and Interest Rates on Mortgages

The ongoing conflict in the Middle East has pushed the price of a barrel of oil above $100.
As a result, energy costs have increased, creating wider economic pressure.

Over the past two weeks, we have already seen interest rates rising. Because of this:

• Some lenders have withdrawn mortgage products from the market.
• Some lenders have not yet reintroduced those products.
• Other lenders have increased their interest rates several times within the last two weeks.

This is the situation we are currently seeing in the mortgage market.
For consumers, it’s important to understand what’s happening and take steps to reduce the potential financial impact.

What You Can Do as a Consumer

1. Apply Early if Your Mortgage Is Ending Soon

If your mortgage deal is ending within the next six months, consider applying for a new mortgage now.
The market is very volatile at the moment, and the interest rate you see today may not be available tomorrow.

Mortgage brokers can be extremely helpful during times like this because they closely monitor market changes
and can warn clients when rates are likely to increase.

However, banks sometimes increase interest rates without prior notice. That’s why the best advice is simple:
Apply early. Mortgage applications can usually be submitted up to six months in advance.

2. Be Careful With Variable Rate Mortgages

Some people are considering variable-rate mortgages such as tracker rates.
While these can work for certain borrowers, they can be risky when inflation is rising.

If inflation continues to increase, the Bank of England may raise interest rates.
If that happens, your mortgage payments could also increase.

Therefore, if you are on a variable rate mortgage, you may be directly affected.
In the current environment, fixed-rate mortgages may be the safer option.

3. Choosing Between a 2-Year and 5-Year Fixed Deal

Many borrowers are currently deciding between a 2-year or a 5-year fixed-rate mortgage.
At the moment, a 2-year deal may be more favorable for many people.

Interest rates have risen suddenly, which means longer deals can come at a higher cost.
Banks may price five-year deals at a premium because they are protecting themselves from further rate increases.

Because every situation is different, it’s always best to speak with a mortgage advisor before making a decision.

Advice for First-Time Buyers

If you are a first-time buyer, rising interest rates can affect how much you are able to borrow.

When rates rise, banks often increase what is called a stress test.
This means lenders assume that interest rates may rise further and calculate affordability accordingly.

As a result, the amount you can borrow may decrease.

At the moment, banks have not made drastic changes, but that could happen if interest rates continue to increase.
If you are planning to buy a property soon, acting sooner rather than later could be beneficial.

Why “Wait and See” May Not Be the Best Strategy

Whether you are remortgaging or buying your first property, waiting to see what happens might not be the best strategy right now.

I have been a mortgage advisor for 10 years, and during that time I have seen wars impact mortgage interest rates.
A recent example was the war in Ukraine.

During that time:

• Interest rates started rising
• Banks withdrew mortgage products
• Lenders increased interest rates several times in a short period

We are now seeing similar trends with the current Middle East conflict.
Some clients who waited during that period ended up paying 1% to 1.5% more than they could have if they had acted earlier.

Act Quickly and Speak to an Advisor

If any of these situations apply to you, speaking with a trusted mortgage advisor as soon as possible is highly recommended.

The mortgage industry is extremely busy right now, with many applications being submitted to secure current interest rates.

Find an advisor who is proactive and able to act quickly on your behalf.

Using Technology to Secure Rates Faster

Many firms now use tools such as Mortgage X to speed up mortgage applications.
This helps clients secure mortgage rates as quickly as possible.

Final Thoughts

If you feel that any of these changes might affect you, please get in touch with a trusted mortgage advisor.

Contact Number: 020 3011 1986

I’m Ifthikar Mohamed signing off. Wishing you all the best, and hoping that the war ends soon so we can all live peacefully and hopefully see better mortgage interest rates again.