As I will shortly be getting daughter ready to go to school for the first time in months, I am equally happy that she gets to learn in the right environment with her friends (and I can concentrate more fully on my work! in readiness for the mortgage market key developments). But equally sad to lose my little companion and training buddy (3-4 times a week she would cycle alongside me as I went for a lunchtime run). It’s been a strange time, which was very hard on occasion, but I am thankful we got to spend so much time together.
This also marks the ending of full-on lockdown as we ease our way out of this situation maybe for good? Lets Hope so. With the budget and a buoyant property market I certainly won’t be short of ways to fill my time, so lets look at some of the mortgage market key developments from last week in more detail.
The 3 main topics are 1) Better options for the Self Employed 2) More product Innovation 3) looking at the devil in the detail of the budget (although more angel than devil in fairness!).
Self Employed Options Increase
Last week saw two of the largest lenders remove restrictions they had placed on Self Employed borrowers. Santander will now go to 75% of a property value (previously 60%) and TSB to 90% which is a very welcome positive change to see which will encourage others to follow suit.
There are additional hoops you will have to jump through such a proving cashflow in the business, but these are quite easy and reasonable steps. Many lenders have been very happy to help self employed clients through this whole period. Many sectors remain unaffected, some have won and obviously some have lost out. But as long as there is a clear logical story to your business, there will be a suitable lender for you.
The Start of Product Innovation Again?
Over the last week we have seen a few lenders offer longer term fixed rate products, but only with penalties for a shorter period. Such as a 3 year fixed rate which you are free to leave after 2 years.
This is very interesting as it clearly acknowledges that margins are higher than they should be at present on some loans, so this lets you secure a property/new deal now, with the option to get out early should mortgage pricing come down in the coming years which we believe it should. That is also in line with our advice that while pricing is low now, it should drop considerable for certain borrowers in a year or two (such as those with a small deposit, the self employed, past credit issues etc).
Budget Reaction – The Detail
The budget reaction has been widely done now, but if you do want a detailed look at the outcomes, see below link/blog and video.
One crucial point to highlight is that the Mortgage Guarantee scheme is available to ALL borrowers at 95%. So this isn’t a rehash of Help To Buy aimed at New Build property, this will be for all borrowers who should benefit from lower pricing and more options when you have a 5-10% deposit on a property. This scheme is set to launch in April, so we will keep a close eye on this and update you as products become available.
Also, the previous nil rate band for First Time Buyers to £300k seems to be a thing of the past so everyone will be paying full rates of Stamp Duty come 1st October.
You can read our full reaction here to the budget: Budget 2021 Response and that’s the Mortgage market key developments for this week.
Market Rates continue their upward trajectory. Mainly pushed up by hopes of an economic bounce back in the second half of this year as the vaccine roll out carries on at pace. No sign the Bank of England will raise rates but with upward pressure on pricing for now for the first time in a long time, could be a good time to fix in for a longer product if you have a marge deposit.
The big news in the budget was that of the ‘Mortgage Guarantee Scheme’ which is designed to bring down the cost of mortgages for those with small deposits. This scheme kicks in from April so it may be some weeks before we see how that will shape the market.
In the last week:
3 Month Sterling Libor = up by 0.013% at 0.075%
2 Year SWAP = up by 0.033% at 0.252%
5 Year SWAP = up by 0.046% to 0.617%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.04%
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