Mortgage Advisers
June 2025
There has been some fantastic changes in interest rates over the last couple of months. In this months newsletter we'll be looking at the changes.
We'll also discuss employment history and how this affects mortgage ability.
Latest News
Finally we saw a small reduction from the Bank of England from 4.75% to 4.50%
This is great news as it not only affects interest rates, which have improved. It also affects affordability as the banks stress testing is more favourable.
What is Stress Testing?
Stress testing is where banks will measure affordability, not just on that days interest rate. They will add a certain percentage on top to ensure that if interest rates rise, then you will still be able to afford your mortgage payments.
This usually sits at around 3% above the interest rate level. This is why some people may be frustrated with affordability as their current rent is higher than the mortgage payment deemed affordable by the bank.
This system is designed to protect you and ensure that you will likely always be able to afford your mortgage payment, even with fluctuations in interest rates.
This has been incredibly important over the last couple of years where interest rates have risen by a significant amount and has protected many home owners when they have had to remortgage to an interest rate 3-4% higher than their existing mortgage.
Any change in the base rate will have an impact on stress tests and so can lift your affordability.
Mortgage Rates Today
1 Lincoln Road - 1 Bed Flat
£235,000
Deposit: £58,750 (25%)
Mortgage Required: £176,250
In January 31st 2025, a 2-Year Fixed Rate for this level of lending would have been 4.68% (APRC 6.82%) with HSBC
On a 35-year term that would make the monthly payment: £853.87
As of May 31st 2025 under the same terms the interest rate would be 4.27% (APRC 6.53%) with Santander
This would give a payment of £809.19
So since January 31st the payment for a purchase of this level has decreased by £89.36 per month or £1,072.32 across the initial 2-year term
Middle Street - 3-bed Semi-Detached House
£500,000
Deposit: £125,000 (25%)
Mortgage Required: £375,000
On January 31st 2025, a 2-yr Fixed Rate for this level of lending would be 4.39% (6.77% APRC) with HSBC
On a 35-year term that would make the monthly payment: £1,749.25
As of May 31st 2025, under the same terms the interest rate would be 3.99% (6.49% APRC) with Santander
This would give a payment of £1,658.16
So since January 31st the payment for a purchase of this level has decreased by £91.09 per month which would be £1,093.08 across the initial 2-year term
North Street - 1-bed Terraced House
£345,000
Deposit: £34,500 (10%)
Mortgage Required: £310,500
On January 31st 2025, a 2-yr Fixed Rate for this level of lending would be 5.03% (7.88% APRC) with Virgin
On a 40-year term that would make the monthly payment: £1,503.40
As of May 31st 2025, under the same terms the interest rate would be 4.67% (7.88% APRC) with HSBC
This would give a payment of £1,430.00
So since January 31st the payment for a purchase of this level has decreased by £73.40 per month or £1,761.60 across the initial 2-year term.
Employment History & Your Mortgage
A lot of people will worry about how long they need to be employed before they can apply for a mortgage and in the past this may have been a concern.
However, when we look at the whole of the market every lender is very different in their approach. Some lenders will require you to be out the other side of probation. Most, however would only need one months payslip for the application and will use your new salary.
Others may only require your new employment contract up to three months before your start date and will use your new employments income for affordability purposes.
I always think, with the huge variation in lenders criteria, you will usually always have an option that fits your circumstances. This is why a lot of our role as a mortgage adviser is not just to look for the best price, but to look at your circumstances and find the lender that works best for you.
Whether this is for affordability, personal circumstances, and of course the best possible price.
Your mortgage should work around these big life changes and you certainly shouldn't put off living just to obtain your mortgage.
Please always get in touch if you ever want to explore your options and see what is possible for you
Approved by In Partnership FRN 190859 June 2025
Jen Boulter