There have been some fairly sensationalist headlines recently such as “Mortgage ticking timebomb warning”, “The end of low rate mortgages” and “Lender crackdown on high loan to value deals”
The housing market is buoyant at present with the Chancellor Rishi Sunak’s Stamp Duty stimulus package being a key driver for those wanting to move. There is also significant demand for clients looking to either remortgage to a new lender, or arrange a deal with their current one.
Mortgage rates have risen for the third consecutive month and lenders have reduced the number of deals available to the market. In some instances, this is to attempt to slow the record demand for new loans.
What tends to be overlooked by most non-mortgage professionals is where the money comes from. Lenders access to funds and the risk profile of their own mortgage book are extremely important.
Banks and Building Societies have traditionally borrowed money via “swap rates” and from the money deposited with them by their customers. Swap Rates are packaged together and are used to price fixed rate mortgages. Variable rate mortgages are mainly calculated against the lenders Standard Variable Rate or Bank of England Base Rate (Discounted & Tracker mortgages).
What we are now finding is that lenders are becoming more cautious about lending money. Something that, most would argue, should have been in place from the beginning. This follows a tightening of regulations post 2008, with a Mortgage Market Review (MMR) proposed in 2009 and coming into effect in 2014.
I wrote an earlier article around mortgage payment holidays and the impact this may have on individuals/couples remortgaging in future. There will be increased caution with England moving into a system of more regionalised lockdowns, and this will create uncertainty for borrowers and lenders alike.
In these uncertain times I must stress that it is important to engage with your broker/bank at the earliest opportunity to ensure that you get the best deal available and understand how you will fit with a lender based on your personal circumstance.
If you have any questions, please don’t hesitate to contact me on 0161 969 1703, 07379 285 601 or email at ben.horsfield@oursocialteam.uk
