Sharply rising mortgage rates could be seen by first-time buyers as a boost rather than a blow to their homeownership dreams, brokers and property experts have claimed, as the higher rate can be “easily offset” by the size of the discount they can secure off the asking price.
Lenders large and small have been upping their rates since Trump launched missiles on Iran, with Santander increasing its rates by 0.65% this week alone in two separate rate announcements.
But experts say first-time buyers should not dive behind the sofa in the current market, but instead seize the opportunity to shave thousands, or even tens of thousands, off the price of the property they are buying, because the balance of power is now firmly in their favour.
Darryl Dhoffer, founder at Bedford-based The Mortgage Geezer, said: “What many people forget amid the rising mortgage rate hysteria is that higher borrowing costs are actually a powerful buyer’s lever.
“When rates climb, the pool of qualified buyers shrinks, causing properties to sit on the market longer. This shift in momentum moves the upper hand from the seller to the buyer. Instead of fixating on the interest rate, people should focus on the purchase price.
“Fortune favours the bold, and the money you can shave off the purchase price can more than make up for the slightly higher mortgage rate. Don’t dive behind the sofa because of higher mortgage rates; use them to your advantage.”
Patricia Ogunfeibo, founder and non-practising solicitor at London-based tenant2owner, urged FTBs to be savvy and understand the opportunity afforded by rising mortgage rates.
She said: “When rates rise, buyers tend to panic and step back, even more so if they’re buying for the first time. But those who understand how the numbers work can turn that panic into their advantage because there is less competition and more negotiating power.
“In times like these, motivated sellers drop their prices. Think landlords selling up, for example. A 5% discount on a £200,000 home saves £10,000 off the mortgage balance, permanently.
“Meanwhile, someone who bought at a ‘better’ rate but a higher price would likely owe more after five years. Rates can always be refinanced, but the price paid is locked in forever. This is why education matters.
“The headlines shout ‘rates up, dreams over’. The reality? Informed first-time buyers are negotiating hard and building equity from day one, especially in areas where landlords are selling fast.
“Knowledge can therefore be the best deposit top-up, and higher rates now can be very good news for the savvy first-time buyer.”
