As we see the weather thaw out this week (and along with it, the excuse to stay in the warm instead of going for a walk/run! Ice & ankles don’t mix well while running) the mortgage market is also following suit by warming up nicely ahead of the spring market with mortgage options on the rise.
Just half term week to survive now… who thought I would miss the distraction of home schooling. My daughter has a week of online ballet/dance classes so no doubt as a synergy benefit, I’ll be akin to Sergei Polunin by the end of the week (If you are not a ballet fan, still worth checking out this breath taking performance).
Mortgage options on the rise
Research from MoneyFacts, a financial research firm, stated that 3,215 mortgage products were currently available. That is the highest amount of choice we have seen since March 2020 when around 5,222 products were on offer. Very encouragingly it is the smaller deposit area that is seeing the largest growth. On the rise in 90 per cent LTV products, Moneyfacts finance expert Eleanor Williams says: “Willingness to extend lending in this risk bracket could be an indication that lenders have confidence in the sector, despite ongoing, wider economic uncertainty.”
While the true number will be much larger, as this doesn’t include Private Banks, brokers have exclusive deals, and some lenders offer bespoke pricing for clients so can’t be compared, it is a very solid barometer of how the market is faring.
Crucially, we are also seeing “affordability” increase, meaning that more mortgage lenders are now offering larger loans than they were. Whereas getting a maximum loan of 4.5 x your income was the norm post Covid, that is creeping up to 5 x or higher. If you put that together with the options for smaller deposits, it means many people will be able to buy/move now who simply were not able to last year which can only be a good thing.
Hint for a Stamp Duty extension?
Last week, the Government announced an extension to completions under the Help To Buy scheme to 31st May. This scheme was planned to come to an end on 31st March, but delays in the system caused by covid have been sited for the 2 month extension.
Is that a statement of intent with Stamp Duty? Delays at every stage of the process is the story all over the property market, not just in the New Build world. We’ll find out in the budget on 3rd March, but perhaps a glimmer of hope.
House Price Affordabilty Decreases
With rocketing house prices and flat or decreasing wages for many, it is no surprise that research from Benham & Reeves (the Estate Agent) shows that House Price affordability (the average house price vs the average income per area), was at its worst since 2011.
The research shows that Nationally, the average net salary hit £25,123 in 2020, an average house price of £249,633 places UK house price to income affordability at 9.94. This means that house prices are now ten times the average salary and a minimum of one’s year’s salary would be needed for the average deposit.
London remains the least affordable with a score of 15.74, with the South East (12.46) and South West (12.46) also remaining some of the worst regions for property affordability. The North East still ranks as the most affordable region at 6.34, along with Northern Ireland (6.48) and Scotland (6.90).
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, and very high demand with limited capacity, we could start to see mortgage rates move up from here.
That said, lenders are offering rates at quite a high margin over market rates, (especially where there is a 25% deposit or less) so we still feel keeping your mortgage options short term will save you the money in the long run.
In the last week:
3 Month Sterling Libor = up by 0.009% at 0.049%
2 Year SWAP = flat at 0.116%
5 Year SWAP = up by 0.070% to 0.388%
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 1.24%
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 February 202
Any questions on the points raised here or any mortgage goal that you may have? Please do pick up with one of the team who would be delighted to help.