Lenders re-introduce mortgages for home movers, who only need to put in a 5% mortgage deposit.
Tuesday marks one year since the first official lockdown and roughly about the same time since I last had a decent haircut. In fact my hair is so long at present I tied it in a ‘top knot’ (as I was told that is the name for such a travesty) as I went to the garden centre on Saturday much to my wife’s dismay that I would go out in public sporting such a look. And that also reflects how Rock n Roll my life currently is…
Volumes will be written on the last 12 months by more qualified and intelligent people than myself, but my overriding feeling is one of gratitude. I have been very lucky that no-one I know has directly been impacted by Covid (besides my Mum giving us a bit of a scare a few months back when she had it, but thankfully fully recovered now). I have been able to work throughout this time, we managed to keep all of the team in place and in fact recruited 2 new starters. Equally, I have had the odd lockdown meltdown and times of very high stress, especially with trying to home-school my daughter, but on balance, if that is my biggest complaint, I’ll take that.
Equally positively our industry is actually coming back stronger for this. Many things have moved forward at a great pace, like Online Property Valuations and much greater use of Tech in what is typically quite an antiquated industry. So I look forward to the next 12 months with much greater optimism about where that will take us (perhaps I tied that Top Knot a bit too tight and I am getting a bit hippie… oh well, rather that than moaning all the time…)
95% Mortgages are back
Last week saw 2 mainstream lenders re-introduce mortgages for home movers, who only need to put in a 5% mortgage deposit. Both are very similar in that the pricing is at the 4% mark, for a 5 year fixed rate, capped at 4.5x your income and have a max loan of £500,000. Making the maximum purchase Price £526,515 (approximately…).
It’s great to see lenders back in this 5% mortgage deposit space, and even more pleasing that some have made the jump before the formal mortgage guarantee scheme starts in April. I assume the assumption is that any loans being applied for now won’t complete until April and therefore will be covered by the Government guarantee.
The pricing is fair given where mortgages with a 10% are being priced currently, but making it a 5 year option is a bit cheeky. That may start to look very expensive in the latter years of the fixed rate, but if that allows you to buy if you are unable to do so currently, that can only be a good thing.
It will be interesting to see how lenders “compete” in this 5% mortgage deposit area, as all the big boys have committed to coming back to offer 95% mortgages with this scheme. I suspect product choice will increase and interest rates will decrease but that won’t happen quickly. As ever, we’ll keep an eagle eye on this but really great news for many buyers that buying a new home with just a 5% deposit is now a reality again. Well played Rishi.
UK Base Rate held at 0.1%
The MPC (Monetary Policy Committee) of the Bank of England held rates at the current record low of 0.1%, almost exactly a year on from when they were cut down to that level as the onset of Covid took hold and the first lockdown loomed large.
While there is a clearly more optimism on the UK economy, a cautious note was stuck in the meeting minutes (these are economists after all…), GDP fell by 2.9% in January, but that was less than expected, and increases are set to be the norm now as lockdown is easing. Also, we enter a period where the ‘year on year’ comparators will start to look quite favourable, assuming things go to plan with the vaccine roll out etc.
What does that all mean in the mortgage world? Well, if you look at money markets, and I do, that paints an improving picture. Specifically, in relation to the Bank Base Rate, current predictions are that the MPC will raise interest rates 2-3 times in the next 5 years, but not in the next 2 years. This is very interesting when you come to arrange your next mortgage – do you fix for the longer term now to mitigate those future rises or keep things short term to take advantage of currently ultra low interest rates? The answer is down to 2 factors 1) your equity/deposit level and 2) your risk profile.
On the first point, as you see above, mortgages where you have less than a 25% deposit are comparatively expensive and the smaller the deposit the higher the rate. So in these instances keeping things short term (where possible) may serve you better in the long run. If you do have a large deposit, now could be the time to fix in for the longer term as 5 year fixed rates have never been this low in the history of mortgages (but I have also said that a lot in the last 20 years, so take that with a pinch of salt).
Market Rates all up again last week, which is reflecting a more positive outlook for the UK economy than was the case at the end of last year.
Not much more to add as this is covered above, but what the best mortgage rate for you will be very dependant on your situation, but in the right circumstances, fixing for the longer term now looks to make sense.
In the last week:
3 Month Sterling Libor = up by 0.003% at 0.081%
2 Year SWAP = up by 0.038% at 0.284%
5 Year SWAP = up by 0.107% to 0.699%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.05%
5 Year Fixed Rates from 1.19%
BTL Rates from 1.19%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec March 2021