We are officially in the period of the lowest mortgage rates ever.
There are now multiple lenders offering mortgages at UNDER 1%! HSBC was the latest lender to join this club, releasing a market best equally 0.94% 2 Year Fixed Rate last week. You do require 40% deposit/equity to qualify, but it is the ‘best mortgage rate’ at that level due to the lower fee of £999 and a free survey.
This spate of ridiculously low rates have been the preserve of those with very large deposit recently, so I was very encouraged to see HSBC also cut their rates if you have a 15% deposit, to 1.99% (same fees as above). They aren’t quite market-leading at that level as the Leeds Building Society has a 1.97% rate, but this is really encouraging as it is starting to decrease the spread in rates from the best mortgages rates to those with smaller deposits.
Again, week on week we are seeing rates come down and options go up for those with a 5% deposit, which is the entry point at present to get a mortgage. Barclays is currently the best option at that level with a 3.49% 2 year fixed rate (which also has no lender fee and a free survey). Compare that to the first 95% deal we saw post budget-announcement in March, which was a 5.08% 2 years fixed from Aldermore, you can see how much things have sharpened up in just a few months.
I have talked a lot about this trend in recent weeks. While the focus has rightly been on the main Stamp Duty holiday ending and the impact it had, if you pull back and look at the market in general, you now have more people able to buy than was the case 6 months ago. With such depleted levels of housing stock and more people able to buy, I can’t see the annual rate of growth for house prices falling anytime soon, especially when you factor in more long-term data which I have looked at previously.
House Prices Up 10.7% by June
Linked to the point about lowest mortgage rates ever, it would be remiss to not look at what impact Stamp Duty & increased lending options is having on the market.
Last week, e.Surv, one of the largest property surveyors in the UK, reported that annual growth in the UK reached 10.7% by the end of June. Much of this was driven by people rushing to hit the Stamp Duty deadline, and as ever, it is heavily regionalised.
This now means the average property price in the UK is now £336,247 (the highest ever, and a 0.8% increase on last month). This is the fastest rate of growth we have seen since February 2005.
The North West is the fastest-growing region at 17.3% (that is despite a 1.1% drop in June as well!). The slowest growing region is London at 1.2% (with a 0.6% drop last month also).
Richard Sexton, Director of e.Surv, hinted that we may not see prices reduce very much for the reasons I have outlined above, his exact words were “[The] 95% LTV mortgage guarantee scheme… is giving continued support and confidence to borrowers and mortgage lenders, many of whom have re-introduced their own higher LTV lending to the market. This fiscal support, combined with the UK’s monetary policy of historically low-interest rates, continues to make home moves more affordable and has meant buyers can take advantage of cheaper borrowing and the savings they have made in lockdown to make their home moves.”
We saw some uncharacteristically large reductions in SWAP rates in the last week. In fact, the largest falls we have seen in over a year.
That could well be a reaction to the expectation of higher interest rates in the short term, which could lead to lower growth and therefore lower interest rates in the medium term. It’s that fine balance of – inflation vs rates vs growth – again. I suspect this will be the big topic for the remainder of the year from an economic/pricing perspective.
Therefore, our default position stands, unless you have any specific needs, we would most likely recommend a longer-term fixed rate if you have a 25% + deposit, but keep it short term or flexible if less than that figure.
In the last week:
3 Month Sterling Libor = up 0.001% at 0.076%
2 Year SWAP = down by 0.027% at 0.381%
5 Year SWAP = down by 0.117% to 0.610%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 0.99%
2 Year Fixed Rates from 0.94%
5 Year Fixed Rates from 1.14%
BTL Rates from 1.19%
Although we currently have the lowest mortgage rates ever, 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 July 2021
Please do pick up with one of our advisors and we will happily talk over what this means for you, and your specific circumstances.