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How Does Recession Affect Mortgage Rates?

Interest Rates vs Mortgages

You may be asking yourself right now, should I be taking a mortgage out when we are expecting an economic downturn? Is taking a mortgage out during a recession too risky?

Whilst a recession is undoubtedly going to affect the housing market and interest rates, this may be a good time to buy or refinance a home. Let’s discuss how a recession will affect interest rates and mortgages.

Deciding how much risk is too much is both a personal decision and one that your lender can help you determine.

How recessions affect interest rates and mortgages

Following an economic downturn and slow in consumer spending, the Bank of England may adjust interest rates to minimise economic disruption in hope to stabilise markets and improve consumer confidence to start spending. Lenders will respond to these changes and will adjusted own rates for lending on mortgages, which will be low.

What are the advantages and disadvantages of buying a home during a recession

Whilst recessions generally slow the housing market, there are always reasons why people are willing to sell and it can be a great time to buy a home. Interest rates may be lower and there may be less competition among buyers with the masses holding firm during uncertainty. With both lower interest rates and the potential of lower housing prices can makes it an interesting time to negotiate. During these times it is a buyer’s market where there are more houses on the market than there are the number of buyers, therefore, supply exceeds demand. This can be good for those in the hunt for a new house as you may be able to find a house listed at a bargain price. If you are ready to make that move and pros overweigh the risk of moving during financial uncertainty, make sure you do your homework and get your finances in order, so you can move at pace. When the home of your dreams comes available you will have to act fast.

Want to talk things through and get some advice? Give us a call at Expert Mortgages and we can discuss interest rates and how a recession affects mortgage rates and give you the support and guidance to make the right decision for you.

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