When it comes to buying a house, Britons have a plethora of questions, with “How much can I borrow?” topping the list. Mortgage brokers at L&C Mortgages have analysed search volumes to reveal the most common queries. Here are the top questions answered by an expert.
When Will Interest Rates Change? Interest rates have been a significant concern, garnering 58,200 monthly searches. The Bank of England has increased rates multiple times over the past year to combat high inflation, with the latest rise in August 2023 bringing the base rate to 5.25%, the highest since the 2008 financial crash. Typically, rates are reviewed every six to eight weeks. While there is no certainty about future changes, rates might peak at 5.75% before potentially declining over the next five years as inflation stabilises.
How Can I Get a Mortgage? This question sees 26,150 monthly searches. Prospective buyers must first assess their financial situation, including current commitments, and check their credit history, which lenders will scrutinise through agencies like Experian or Equifax. Improving a low credit score involves timely debt repayments, setting up direct debits, and ensuring one is on the electoral roll.
A substantial deposit increases the likelihood of securing a mortgage, but buyers should also budget for additional costs like stamp duty, surveys, and conveyancing fees. Obtaining a Decision in Principle (DIP) can demonstrate to sellers a buyer’s seriousness and provide a clearer picture of how much a lender might offer.
With various mortgage types available, the most common being fixed-rate mortgages, seeking professional advice from a mortgage broker can be invaluable. A good broker will search the market, considering individual circumstances to find the best deal.
How Much Can I Borrow? The most searched question, with 153,000 monthly queries, centres on mortgage affordability. Lenders evaluate factors such as age, income, and monthly outgoings to determine if an applicant can manage repayments both now and in the future. Prospective borrowers need to provide proof of income, with self-employed individuals typically needing to show at least two years of tax records.
How Much Is My House Worth? Attracting 102,550 monthly searches, this question is crucial for sellers or those looking to remortgage. Accurate valuations can be obtained through estate agents or registered surveyors, although online tools can offer a general estimate. Mortgage lenders will require a precise valuation to confirm the property’s worth.
How Much Deposit Do I Need? With 26,350 monthly searches, this query highlights the importance of a sufficient deposit. A minimum of 5% of the property value is required, but deposits of 10% or 15% can secure better mortgage rates, as lenders view higher deposits as lower risk. Top rates are often reserved for deposits of 25% or 40%. While 100% mortgages exist, they are rare post-2008 financial crash and typically require security from family members.
Gifted deposits must be verified by lenders as genuine gifts, not loans, with a preference for gifts from close relatives over friends.
How Much Is Stamp Duty? This tax-related question receives 25,050 monthly searches. Stamp duty, or land transaction tax, is payable on property purchases above certain thresholds. In England and Northern Ireland, rates range from 5-12% of the property price, with surcharges for additional properties. First-time buyers can purchase properties up to £425,000 before paying stamp duty, while others pay on properties over £250,000.
Wales and Scotland have their own stamp duty rates, known as Land Transaction Tax and Land and Buildings Transaction Tax, respectively.
Understanding these key aspects can help prospective buyers navigate the complex process of purchasing a property, ensuring they are well-prepared and informed.
Please visit https://www.landc.co.uk for more information.