I hope someone can help with this, as my daughter is getting quite anxious about making the right decision and I must confess I am not much use as we bought our own home in the early 1990s when everything was rather different.
My daughter (28, first time buyer) has had a mortgage offer from Nationwide at 4.29% fixed for two years on a two bedroom flat in Maidstone. The offer is valid until early April. She has a 15% deposit saved, partly from her own savings and partly from a gift we gave her last year (which I posted about on here at the time, thread 1362 for anyone interested). The flat is £235,000 and the vendor has accepted her offer of £228,000.
Her concern is that with the Bank of England having cut the base rate to 3.75% in December, and mortgage rates now apparently at their lowest since 2022, there may be further cuts coming that would mean she could get a better deal if she waited a few months. She has seen various articles suggesting the BoE might cut again in February or March.
My worry is that if she delays, the flat could fall through, or the vendor could accept another offer. The market around Maidstone seems quite busy at the moment, with several properties she looked at going under offer within a week or two of listing.
I suppose my questions are:
- Is 4.29% fixed for two years considered a reasonable rate at the moment for someone with a 15% deposit?
- If rates do come down further in the next few months, could she remortgage or do a product transfer relatively quickly after completion, or would there be early repayment charges?
- Is there any risk that waiting could mean she ends up with a worse deal rather than a better one, given the January asking price data suggesting prices are rising?
I would be grateful for any thoughts. Many thanks.
Tell her to take it. 4.29% is fine. My niece spent six months waiting for rates to drop last year and the house she wanted sold to someone else. She ended up buying somewhere she liked less for more money. Nobody ever timed the market perfectly and she won’t be the first.
I agree with Doris on the general principle of just getting on with it, but I would push back slightly on the idea that 4.29% is some kind of bargain that needs grabbing before it vanishes. That is the average two year fix right now, it is not a special deal, and if anything the direction of travel since the December base rate cut suggests she could see sub-4% two year fixes by the summer without doing anything heroic. The real question for your daughter is not whether 4.29% is a good rate in isolation, it is how long she is fixing for and what the total interest cost looks like over that term versus a tracker or a shorter fix with the possibility of remortgaging sooner. If she is buying her first home and plans to stay put for five years she might be better off looking at the five year fixed products which are not far off the twos at the moment, and at least then she does not have to go through the whole remortgage circus in 2028.
Thank you both for the replies, and @Frankie91, I take your point that 4.29% is not historically remarkable. My daughter has gone back and forth on this all week but has now decided to lock the rate in. Two things tipped it for her. First, @halfpenny_doris’s point about her niece losing a property while waiting for rates to fall really hit home, as my daughter has already had one offer fall through last autumn and does not want to go through that again. Second, the broker confirmed the offer expires on 18 February, so there is a hard deadline in any case.
The property itself is a two bedroom Victorian terrace in Canterbury and has been reduced twice since the autumn, so she feels the price is fair even if the rate is not the lowest it will ever be. Her view now, and I think it is sensible, is that she can always remortgage in two years if rates come down further. I would rather she was in the property and settled than endlessly waiting for the perfect combination of price and rate.
Many thanks again to everyone for the input. It has been very helpful.