On 4 August, the Bank of England increased the base interest rate from 1.25% to 1.75%. Off the back of this, additional increases to interest rates have begun to filter through the mortgage market.
The latest base interest rate increase was the biggest rise in 27 years and will naturally have implications for HMO investors. This is especially the case as further increases are expected to push up the cost of borrowing in the coming months.
Because of this, there has been a rush to remortgage and lock in interest rates, which has caused mortgage delays for some. So, what does this mean for the HMO mortgage market? Here we’ll cover what’s happening with mortgage deals, in addition to tips for how you can secure mortgages more quickly moving forward!
What’s Behind Mortgage Delays?
It’s no secret that interest rates are on the rise and that more increases are expected. This is happening as UK inflation recently hit 10.1%, a 40-year high, and is expected to reach 13.3% later this year.
As mortgage rates continue to increase, more and more property owners are hurrying to secure mortgage and remortgage deals. The rush to lock in interest rates is creating a sense of urgency for many to secure better fixed rates to protect against future rises, but at the same time, lenders are taking longer to produce offers.
So, if you’re looking to secure a mortgage or remortgage, you may have to wait longer than usual. And increasing mortgage rates and delays are likely to be an ongoing story in the months ahead. On top of that, mortgage shelf life recently dropped to a new low, and there are fewer mortgages available across the board.
Rachel Springall, the finance expert of Moneyfacts.co.uk, commented: “Borrowers who have not locked into a fixed rate would be wise to move quickly to secure a new deal as interest rates continue to climb. Fixing for longer may be in the mindset for some, as there is anticipation for further base rate rises to come.”
Tips for How You Can Secure Mortgages More Quickly
As a HMO investor, if you’re looking to secure a mortgage in this climate, it’s important to be prepared as borrowers are urged to move swiftly. Here are some of my top tips to help you secure mortgages more quickly!
1. Do your research ahead of time.
HMO mortgages are still considered to be a special type of mortgage. This makes applying for one to be slightly more complicated.
Because of this, it’s important that you do your research on the sector well in advance. This includes reading up on the different rules, requirements, and assessment criteria as these all vary among lenders.
Make sure you’re fully aware of the most common considerations and plan for them. At this point, it can also be helpful to strengthen your mortgage application and rental income statements (legitimately of course). This will all help you master the art of applying for HMO mortgages!
2. Have your documents and financial records ready.
Get all of your documents and financial records together before you even start looking for properties to purchase. Stay organised and keep all of your documentation in place so that you can easily access it when needed. This ensures there won’t be any unnecessary delays on your end.
3. Make your deal analysis as strong as possible.
Having strong prospects and evaluations for every deal can make the bank feel more comfortable and confident lending to you.
When you achieve this, banks are more likely to lend to you for longer and for cheaper, so perfect your process for analysing deals. And as costs and inflation continue to increase, make sure you’re effectively analysing what a HMO deal might look like under any circumstances.
4. Use a mortgage broker with HMO expertise.
Mortgage brokers can help you find the best deals for your personal and financial circumstances, particularly as finding the right one can be a minefield. These professionals can also help you better understand lenders’ varying criteria while helping you navigate entire property purchases.
This allows you to benefit from their experience and knowledge throughout the entire buying process, which is especially valuable in the current state of the market.
It’s important to keep up with everything going on in the HMO mortgage market as it can allow you to secure funding and scale your business! And getting yourself in a super lendable position will help you do that.
Mortgages are part of the second of five stages of The HMO Roadmap, which is all about funding. For more lessons on how to start, scale, and systemise your HMO business, sign up for The HMO Roadmap today! And if you’d like to chat with our mortgage broker, contact Ellie here.
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!