'We've saved for nearly two years and finally have the deposit to move to a bigger family house. Yet after the Bear Stearns collapse, we're terrified that mortgage rates may rise massively. Should we hold off until things are calmer? Or move and try for the cheapest rate that we can – such as an interest-only mortgage?' JG, Bucks
One thing is for sure: you're not alone in your sentiment. Over the last few days, anxieties from the mouths of learned economists about the UK housing market's likely rocky road ahead have spread from bulletins and reports into pubs, homes and the workplace.
But despite this slew of bad news – the credit crunch turmoil, a shaky UK housing market, teetering consumer confidence and uncertain Bank of England base rate moves and general sense of economic malaise – it's not madness to go ahead with your move.
While lack of liquidity – or easy cheap money – in the market is making banks ever more reluctant to lend to each other, prompting your fears of higher mortgage rates as lenders reprice their deals to protect themselves, you actually need to look away from the bigger picture and focus on something else instead: your own personal situation.
"This is all about market confidence and borrowers just don't know which way to turn – plenty of people are already being put off from buying," says David Hollingworth of broker London & Country. "But not buying because of all this concern about the housing market is crazy; it's important to look at your own circumstances and put them first. If you've a baby or new family, then you have to move for the longer term – obsessing about short-term house price moves is no help."
Affordability, today's buzzword for survival in the UK mortgage market, is what counts – and since you've done the maths, and prepared by saving a big deposit, then there's no reason to hold back, says Melanie Bien, at broker Savills Private Finance. "If you can afford to buy now, I wouldn't delay: cheaper mortgage rates are being pulled at the moment as credit crunch events could make the market more costly in future."
Assuage your concerns about rocketing mortgage costs with a simple fixed-rate deal that cements the size of your monthly repayments. As Katie Tucker, at broker John Charcol, says: "A two-year deal should see you through this turmoil."
According to Savills Private Finance, two-year fixes start at 4.75 per cent, if you're prepared to pay the high £1,498 fee from First Direct – although you will need a chunky 20 per cent deposit.
As for an interest-only loan, Andrew Montlake, of broker Cobalt Capital, advises caution: "You'll pay lower monthly payments but without paying off any capital; in the short-term it could work to help if finances are tight, but only if a swift switch to a repayment mortgage follows."