I am pleased to be writing today with what appears to be light at the end of the tunnel. It seems a lifetime ago that the COVID pandemic had begun to take hold of the country with the Prime Minister ordering the country into lockdown.
As with the financial crisis of 2008, the pandemic and subsequent lockdown forced lenders to re-evaluate their risk appetite. The housing market has always been a key indicator of economic growth in the UK and this had come under severe pressure with the risk to both lives and jobs.
Due to the additional risk, lenders cut the availability of credit whilst increasing interest rates to levels that had not been seen for many years. This was partly a result of increases in lenders’ borrowing costs and the perceived increased risk of mortgage defaults.
However, now we appear to be navigating our way through the pandemic, government stimulus packages for the majority of businesses and individuals (furlough, CBILS/BBILS and Stamp Duty) have seen renewed optimism in the markets.
The last 9 months have seen the availability of credit increase with lenders returning to the market with a suite of highly competitive products to entice borrowers both new and old.
We have seen rate reductions across most residential and buy to let product areas (Fixed, Tracker and discounted variable). There are now 2-year fixed rates starting from as little as 0.99 per cent with the lowest 5-year deals starting at 1.23 per cent. Even buy historic standards, rates are low.
There is good news for first-time buyers, who have found it much harder to get on the property ladder over the last 12 months with low deposit deals (upto 95 per cent) being made available through government backed mortgage guarantee schemes and a more positive lender outlook.
In May 2020, there were just over 100 products available for 90 per cent mortgages, there are now more than three times that number. More recently, lenders have started to relaunch five per cent deposit mortgages, and there are now 100 of these to choose from.
I have previously referred to lenders risk appetite and this is at the forefront of being able to support applicants borrowing money at higher loan to values (LTV). Buyers will need near-perfect credit ratings to get one of these mortgages, and some lenders are excluding flats and new-builds due to the potential for values to fluctuate.
The continued enhanced due diligence being displayed by lenders, coupled with increasing confidence should continue to see mortgage rates stabilise if not reduce further in the near future. The last of the government stimulus packages covering Stamp Duty will finish on the 30th of June so it will be interesting to see how this will impact the market, I would suggest that it may slow down temporarily.
In short, low interest rates look like they will be around for a while yet……….
This is where an independent mortgage adviser can be invaluable. An independent mortgage adviser can fully assess your requirements/needs, complete all of the necessary research and provide a recommendation, with full justification taking into account every available lender in the market.
This article was written by Ben Horsfield, Head of Mortgage Services, Suttons Independent Financial Advisers Ltd