Ever since financial times got tough in this country 10 years ago – thank you, greedy bankers – there have only been two sustained rays of economic light to keep us happy: near-full employment and, for homeowners, the reign of rock-bottom mortgage rates.
If you have had equity in your home or you have managed to build a big deposit to buy a property, you have probably been a mortgage winner, taking advantage of some of the most attractive loan rates ever made available in this country.
Looking back at my own stretched personal finances since the financial crisis of 2008, there are only three achievements I am proud of – two of which relate to mortgages.
Firstly, I have managed to accumulate a half-decent pension through diligent regular saving and the generosity of my employer, which has kindly topped up my personal contributions.
Secondly, I have taken every opportunity throughout the past decade to lock down my mortgage payments by taking out a series of fixed-rate loans. Earlier this year, I took out a new two-year fixed-rate mortgage with my existing lender, which means I now know where I stand financially until 2020.
Why only two years? It is simple. At my time of life and with the kind of work I am involved in – where job insecurity rules – I cannot afford to look any further ahead.
Thirdly, and most importantly, since 2008, I have managed to chip away at my mortgage debt through regular overpayments. It is my intention that, come 2020, I will be loan free. My home, a suburban town house, will at last be my (our) mini castle. I will no longer be in hock to my bank.
“Fix: the mortgage word of the moment”
For anyone who has a mortgage deal coming to an end, I urge you to strike while you can – and lock down your payments with a fixed-rate mortgage. I do not say this just because it looks as if the Bank of England base rate will rise at some stage over the summer from its current 0.5%, pushing up mortgage prices with it. It just makes great sense for a host of other solid reasons.
It will buy you certainty at a time when uncertainty (Brexit, a wobbly Conservative administration, et al) rules the waves. It will also allow you to budget with confidence rather than having to constantly worry that your mortgage payments could rise.
Although I opted for a two-year fix because of financial circumstances peculiar to myself, I would recommend borrowers opt for three- or five-year fixes. A good mortgage broker should be able to point you in the right direction – and, in most instances, will not charge you for their services (many are paid by the lenders whose mortgages they recommend).
Of course, the dirt-cheap mortgage market we are currently enjoying is not necessarily indicative of a healthy, consumer-friendly one. Far from it.
For example, some of the rules introduced by regulators governing mortgage affordability remain far too inflexible – and fail to take into account a changing labour market that is resulting in millions of workers moving from full-time employment to part-time work or self-employment.
I went through a mortgage affordability test five years ago and I am still recovering from the experience. I felt as if I had been financially strip-searched. It is one of the main reasons why I have stuck with my current lender, which does not make me jump high hurdles every time I want to take out a new deal.
Thankfully, some of the newer lenders are rising to the challenge and embracing – rather than rejecting – ‘new age’ workers. Sensitive, sensible, flexible lending. That is the way forward.
It is also crazy that some mortgage borrowers remain trapped on high standard variable rate loans because their lenders will not allow them to switch to a cheaper deal. This is unfair and no more than blatant profiteering. Thankfully, and not before time, the regulator is on the case and promising to act.
Remember. Fix. In so many ways, the mortgage word of the moment.
JEFF PRESTRIDGE is the personal finance editor of The Mail on Sunday. He won the Contribution to Personal Finance Education category at the Santander Media Awards 2016. Email him at email@example.com