Mortgage rates have been rising sharply again as global uncertainty continues to ripple through financial markets
Mortgage rates have seen a sharp increase once again as global uncertainty continues to impact financial markets. Persistent tensions in the Middle East, coupled with stubborn inflation and escalating oil prices, have led to predictions that interest rates could stay high for an extended period, or even increase further, despite earlier hopes this year that borrowing costs would begin to decrease.
This shift has been disconcerting for borrowers, particularly first-time buyers. Many would have begun the year feeling hopeful, only to witness mortgage products being repriced, withdrawn or hiked rapidly.
Offers that seemed affordable just a few weeks ago may no longer be viable in the same way, leaving buyers wondering whether they should proceed or hold off. However, whilst much attention has been on rising rates, another factor may be subtly re-emerging in the market, according to one specialist.
Gazundering is the practice of a buyer reducing their offer on a property at the 11th hour, typically just before contracts are exchanged. It’s a contentious tactic and generally frowned upon – but in the worst-case scenario, it’s something that responsible buyers must contemplate.
As affordability becomes more strained and borrowing costs escalate, the figures behind agreed property purchases can alter swiftly. What once seemed manageable can suddenly feel stretched, especially for first-time buyers who often have less financial leeway.
Patricia Ogunfeibo, founder and non-practising solicitor at tenant2owner, advised buyers not to feel trapped into decisions that no longer make financial sense.
She said: “Gazundering could be back. With mortgage rate volatility driven by geopolitical uncertainty and the Bank of England holding firm, the numbers that worked a few weeks ago might no longer work.
“But, for well-informed first-time buyers, this need not be a crisis. If your borrowing costs have materially changed since your offer was accepted, or you are rightly worried about the impact of the current crisis on your finances more generally, such as gas and electricity bills, you simply must revisit that offer. That is not gazundering for sport, that is a responsible reassessment of your financial wellbeing.”
While gazundering has traditionally been seen in a negative light, often linked with opportunistic behaviour late in the transaction process, Patricia said the current climate is different. Rising rates are not a matter of negotiation tactics, but a fundamental shift in affordability.
‘Not prudent’
Buyers who go ahead without re-evaluating their position risk committing to a purchase that may no longer be sustainable – especially if they’re on a tracker mortgage with rates potentially set to rise. Patricia emphasised that reassessment is particularly crucial for first-time buyers, who are more vulnerable to changes in borrowing costs.
She added: “People in the middle of a chain might be able to absorb moderately higher costs, but it is not prudent for a first-time buyer to. My advice is know your numbers, protect your position and never proceed with a transaction that no longer adds up for you just to be polite.
“First-time buyers shouldn’t think they are committing a crime by seeking to start a reassessment dialogue because sometimes, with co-operation, the whole chain will re-jig their numbers.
“In a volatile market, being decisive is important. But being financially secure, especially when buying a first home, is essential.”
Borrowers are being encouraged to pause and reconsider. This might involve renegotiating the purchase price, investigating alternative mortgage products or, in certain instances, pulling out completely – the absolute last resort anyone desires.
Experienced sellers recognise the expense of collapsed deals and, given the option, would likely prefer to renegotiate on price, Patricia explained. For first-time buyers dealing with climbing rates and changing affordability, she stated the message was unambiguous: don’t disregard the warning signals and don’t hesitate to safeguard your position if the figures no longer stack up.
