Today’s Bank of England decision to keep mortgage rates on hold at 5.25% will be a relief for many. With five votes to four, the Monetary Policy Committee were split. Yesterday’s surprise fall in inflation probably tipped the vote. We’ll wait to see what happens when they next meet on 2 November 2023.
R&BS Director, Rob Lister says, “Today’s news does not determine whether we have reached a peak in base rate, but it is certainly better news for borrowers. We’ll continue to monitor market commentary as the economy moves forward.”
But with mortgage rates still higher than they have been for over 15 years (since March 2008), how can those buying land, looking to diversify or refinance make sure they are getting the best deal?
The wrong deal can end up limiting your future options, tying you in for an unnecessarily long period or being more expensive than could have been available elsewhere or with a little bit of negotiation.
Here’s some tips on what to consider when talking to banks or lenders. Whatever your priorities and requirements, the same basic rules will apply to all cases when preparing your application, negotiating with lenders and accepting any offer. These are:
- Start looking early and well in advance of when you need the funds. If it’s for a new build project look into the finance even before planning. The finance you can get and when, could limit – or improve – what you might be able to achieve. And if you are refinancing, start preparing and looking about 9 months before any fixed rates end.
- Have all the documents and figures that the banks need to see ready from the outset.
- Present your case to the bank or lender in the best way to maximise your chances of securing the finance you need and on the terms you need.
- Take advantage of competition in the market. ‘Shopping’ the whole market and not just your existing lender, makes sense now more than ever. Your existing bank or lender may not be the one who can offer you the most suitable deal.
- Don’t always accept the bank’s or lender’s first offer and terms. Be prepared to challenge.
- Be prepared to challenge covenants, clauses and conditions such as EBIT (earnings before interest and tax) and EBITDA (earnings before interest, tax, depreciation and amortization).
- Don’t be drawn in to offering more security than the bank requires. You’ll have more flexibility to take on another mortgage, perhaps at a better deal, from another provider in the future.
- Be aware of penalties for early repayment or lump sum payments. If you want to pay off a large amount after a good trading year, why should you be penalised by the lender?
Deciding, negotiating and agreeing the right mortgage with the right bank or lender is crucial to allow your farm or rural business to progress.
We're here to help. Our consultants have years of experience in agricultural mortgages - which means they know a good deal when they see one, and where there is room to make the agreement better for you.