{"id":42475,"date":"2024-09-14T05:11:41","date_gmt":"2024-09-14T05:11:41","guid":{"rendered":"https:\/\/kede.com.br\/news\/dangers-of-being-a-fomo-customer-as-rates-fall\/"},"modified":"2024-09-14T05:11:43","modified_gmt":"2024-09-14T05:11:43","slug":"dangers-of-being-a-fomo-customer-as-rates-fall","status":"publish","type":"post","link":"https:\/\/kede.com.br\/news\/dangers-of-being-a-fomo-customer-as-rates-fall\/","title":{"rendered":"Dangers of being a FOMO customer as rates fall"},"content":{"rendered":"


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Falling mortgage rates may, at last, be bringing some relief to embattled homeowners and first-time buyers.<\/p>\n

In a market described as “frenetic”, lenders are locked in intense competition for new customers while simultaneously trying to hold on to borrowers already on their books.<\/p>\n

On supposedly unlucky Friday the 13th alone, big-name providers such as the Nationwide, HSBC and NatWest reduced their fixed rates. In an unusual move, TSB did so for the second time in a week.<\/p>\n

Analysts expect further cuts to come, but brokers say the fear of missing out (FOMO) on better deals is paralysing some borrowers. <\/p>\n<\/div>\n

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Failing to act before their current deal expires leaves them exposed to a much more expensive variable rate.<\/p>\n<\/div>\n

National obsession<\/h2>\n<\/p>\n
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During the last couple of years, mortgage rates have featured in discussions from chats around the dinner table to election debates.<\/p>\n

About 1.6 million existing borrowers had relatively cheap fixed-rate deals expiring this year. Hundreds of thousands of potential first-time buyers have been hoping to get a place of their own.<\/p>\n

Yet, rates have been volatile and much higher than what was the norm for more than a decade.<\/p>\n<\/div>\n

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The interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it. <\/p>\n

Average rates on new deals are now 5.49% for a two-year deal, the lowest for more than a year. Five-year deals have an average rate of 5.15%, according to the financial information service Moneyfacts.<\/p>\n

However, the best, so-called headline, rates are reserved for those borrowing a small proportion of the value of the home (known as loan-to-value). A few are at levels not seen since rates shot up following the mini-Budget in the short-lived premiership of Liz Truss.<\/p>\n

“Momentum is really starting to build now and the cuts are coming thick and fast.,” said Emma Jones, managing director at broker When The Bank Says No.<\/p>\n

“Borrowers are the winners as lenders seek to compete for all-important market share as we head into the final months of the year.”<\/p>\n<\/div>\n

‘We took the plunge’<\/h2>\n<\/p>\n
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The Bank of England’s interest rate cut in August, with the potential for more to come, is part of the reason for falling mortgage rates.<\/p>\n

That came slightly too late for Johnny and Sophie Abbott, whose last mortgage deal expired at the end of July. <\/p>\n<\/div>\n

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\"JohnnyJohnny Abbott<\/span><\/div>\n<\/div>\n

Johnny and Sophie Abbott decided to move house<\/figcaption><\/p>\n<\/figure>\n
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When they spoke to the BBC in Marc<\/a>h, the couple from Loughborough, who have three children, admitted every option seemed like a gamble. <\/p>\n

In the end, they chose to buy a home that needed renovation.<\/p>\n

“We took the plunge and can just about deal with the mortgage,” said Mr Abbott. “It will be great when it’s done.”<\/p>\n<\/div>\n

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In June, the Bank of England said three million households would see their mortgage payments rise<\/a> in the next two years, and about 400,000 mortgage holders were facing some \u201cvery large” payment increases.<\/p>\n

A few months ago, Gary Rees expected to have to make serious lifestyle changes<\/a> when his current deal expires in October. Now, things are looking better.<\/p>\n

Yet, typical of many, the benefit is a smaller rise in his monthly mortgage repayments, not a fall. To be blunt, the financial punch won’t hurt as much.<\/p>\n

“It’s improved, but my mortgage rate is still likely to double, rather than triple,” he said.<\/p>\n

He is expecting to settle on a two-year deal, in the hope of further rate falls. The Bank of England’s next interest rate decision is on Thursday, although analysts are predicting a hold at 5%<\/a>.<\/p>\n<\/div>\n

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These two cases show that, although things are looking more positive for borrowers, not all are getting an equal benefit. Savers, meanwhile, are seeing the interest they receive worsen.<\/p>\n

Brokers say that lenders have been offering the best deals to new, house-purchasing customers, rather than those who are remortgaging.<\/p>\n

With relatively few buyers, providers are trying to get a piece of a small pie, according to David Hollingworth, of broker L&C. That includes offering loans at higher multiples of income, up to 5.5 times.<\/p>\n

He said that while the lowest rates were “not divebombing”, the market was frenetic.<\/p>\n

The market could also improve for remortgagers, he said, as lenders try to hit year-end targets.<\/p>\n<\/div>\n

Time to act?<\/h2>\n<\/p>\n
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Mr Hollingworth said the danger for any borrowers endlessly waiting for even lower rates to come is that they do nothing.<\/p>\n

If a fixed deal expires, then borrowers automatically move on to their lender’s standard variable rate – which currently carries an average interest demand of 7.99%, which is two-and-a-half percentage points higher than a new two-year deal.<\/p>\n

Adviser Jo Jingree, director of Mortgage Confidence, said people in the process of buying or remortgaging could still switch to a better deal if rates continued to fall before their personal deadline.<\/p>\n

“I\u2019ve seen first-hand that customers have been able to achieve revised mortgage offers on the lower rates which will save them money on their monthly payments,” she said.<\/p>\n

Borrowers should monitor their rates, particularly a few weeks before their mortgage completes, to ensure they are getting the best possible rate, said Aaron Strutt, of broker Trinity Financial.<\/p>\n

He expected rates to keep falling, especially if the Bank of England cuts the base rate on Thursday, or later this year.<\/p>\n

With the cost of funding mortgages coming down, some in the industry suggest lenders could have cut rates more quickly.<\/p>\n

They say lenders are making smaller price cuts week after week when they could be making larger reductions in one go.<\/p>\n<\/div>\n

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Ways to make your mortgage more affordable<\/h2>\n<\/p>\n
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