Podcast: Are interest rates dropping? An update on the Scottish property market

In this episode, Paul and Megan are joined by our expert mortgage advisors, Paul Demarco and Lisa Bell, to talk about the current state of the mortgage market in Scotland. The discussion covers the impact of recent interest rate changes, the rise of remortgage deals, and the competition among lenders to offer better rates. The panel also explore trends in first-time buyer deposits, the complexities of 100% mortgages, and whether now is the right time to remortgage. Tune in for expert advice on navigating today's mortgage landscape.

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Key Insights

What’s the current state of the mortgage market in Scotland

The market is experiencing a slowdown as buyers adopt a cautious approach, awaiting the chancellor's budget announcement. Although inquiries remain high, fewer buyers are proceeding with purchases. Despite this hesitation, many transactions are still taking place, but the general pace has slowed due to economic uncertainty.

Interest rate cuts prove beneficial for borrowers

The Bank of England's decision to cut interest rates from 5.25% to 5% has had a noticeable impact, particularly on fixed-rate mortgages. Rates have slowly decreased across most lenders, though some have briefly increased rates before reducing them again. The fluctuating nature of these cuts has created a mixed environment, but overall, mortgage rates have trended downward, which is beneficial for borrowers.

There’s increased competition among lenders for remortgages

A key trend in the market is heightened competition among lenders, particularly for remortgages. As market activity slows, lenders are keen to win over more clients, leading to more favourable terms for homeowners looking to refinance.

What are the deposit requirements for first-time buyers?

For first-time buyers, a minimum deposit of 5% is typically required, but this depends on credit scoring, with 10% being a safer benchmark. There’s also the option of 100% mortgages, which require no deposit but are restricted to renters with a strong history of paying rent. These mortgages are less common and come with tighter criteria, as they present a higher risk to lenders.

Longer mortgage terms aid initial affordability

The team discusses a trend which sees many buyers extending their mortgage terms to 35 or even 40 years, due to affordability stress tests becoming more stringent. This lowers monthly repayments, making mortgages more affordable in the short term. While this helps buyers get on the property ladder, it comes with the downside of paying more interest over a longer period.

Timing for remortgaging and locking in rates

Homeowners whose fixed-rate deals are ending are encouraged to remortgage now, as staying on a lender’s standard variable rate (SVR) can result in significantly higher payments. Lenders offer varying remortgage options, with some allowing rate reviews as early as six months before the current deal expires. Buyers can lock in a deal but continue to monitor rates and switch if a better option becomes available before finalising.

Future outlook for interest and mortgage rates

The team discusses forecasts for future rate cuts, predicting the Bank of England will reduce rates again, potentially by early next year. These reductions are expected to drive down mortgage rates, particularly for fixed-rate products. Economists suggest base rates could fall to 4% within the next 12 months, and fixed mortgage rates may drop to around 3.5%, providing further relief for borrowers.

Support for those looking to remortgage

The podcast highlights, that for those looking to remortgage, lenders offer incentives like free surveys or cashback to help cover costs, though the cashback amounts often fall short of full legal fees. It’s also important to seek independent advice to explore the full range of mortgage options available across the market.

 

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