With mortgage rates now rising and Halifax the latest lender to increase rates by up to 0.2% from tomorrow due to escalating tensions in the Middle East, borrowers who were hanging on for lower rates when they were falling a few weeks ago may now be regretting their decisions. One broker has warned that while waiting for rates to come down further will have felt like a sensible strategy — after all, everyone would rather pay less for their mortgage — the problem is that it only takes into account one side of the financial equation and can prove costly, especially if rates start to quickly head north as they have done.

“I refer to delaying for a better mortgage rate as the Waiting Penalty,” said Stephen Perkins, managing director at the national mortgage broker, Yellow Brick Mortgages.

Stephen added: “Most people spend weeks calculating how much they could save if mortgage rates fall by another 0.2%, but very few stop to calculate what waiting itself might cost. We’re all good at calculating the costs we can see, but it’s the ones we don’t see that often end up costing us the most.”

Stephen said buying a home was a much bigger financial decision than simply choosing a mortgage rate, with the mortgage rate itself being just one part of a much bigger picture.

He continued: “When you’re waiting, house prices can move, inflation can rise, lenders could become more cautious about how much they’re prepared to lend, Government policies can change and buyer demand can increase. With that in mind, focusing on mortgage rates alone is a bit like watching one cog in a machine while ignoring everything else that’s moving around it.”

Stephen said he regularly saw buyers delaying their purchase in the hope of securing a slightly lower mortgage rate, only to find the property they wanted had increased in value, wiping out much or all of the savings. Equally, he warned that if inflation looked like it was set to start rising again, lenders could become more cautious about how much they’re prepared to lend, meaning people can suddenly find they can borrow less than they could have just a few months earlier. On top of that, lenders can also increase their rates, as has happened over the past fortnight or so.

Stephen added: “The problem is that many buyers wait for all the planets to align: lower mortgage rates, stable house prices and the perfect property. But the reality is those conditions rarely arrive all at once.”

Stephen said many borrowers don’t realise that securing a mortgage today doesn’t necessarily mean missing out if rates fall tomorrow. Many good brokers will continue monitoring the market after an application has been submitted and, where possible and timescales allow, switch clients onto a cheaper mortgage product before completion if rates improve.

But he cautioned: “Not every broker offers this service, so it’s well worth asking the question before choosing your mortgage broker. Yes, mortgage rates matter, of course they do. But they’re only one part of a much bigger financial picture.

“The next time you’re tempted to wait for mortgage rates to fall just a little further, don’t just ask yourself what you might save. Ask yourself what waiting might cost. That’s your Waiting Penalty.”