This week I discuss mortgages with smaller deposits, mortgage rates hitting new lows, and larger loans available from mainstream lenders.
For most of us with children, this is the first full week back with a semblance of normality! For those without children, a great chance to get away without being surrounded by kids and not having to pay for eye-watering prices for flights… God, I miss those days…
Even if you aren’t getting away this week, we may finally get to enjoy a warm sunny week which will be a rare treat for this non-event of a summer we are having.
Things are certainly hotting up in the mortgage world. In fact, it is getting close to the old days of rate wars and lenders undercutting each other on both price and policy. Below are the key points I have picked out from the last week;
Mortgage Rates Continue To Hit New Lows
Last week, 2 more of the largest lenders in the UK introduced sub 1% rates (Barclays and Nationwide). There are now 8 major lenders offering best mortgages rates of sub 0.9%…
Lending at this level will always be the preserve of those with a large amount of equity, typically 40% +, but we have also seen lenders cut rates right across their product ranges making it the cheapest time EVER to borrow on a mortgage…
Mortgages With Smaller Deposits More Accessible
As touched on above, lenders are both cutting interest rates for those with smaller deposits, and more importantly, offering more products in this area which makes moving a much more realistic option for many, and offer the ability to refinance where some borrowers had been stuck previously.
At the lowest level, some lenders are now offering 95% mortgages (so needing just a 5% deposit) at sub 3%. Even more importantly, there are now 29 lenders in this space, where there literally none at some points last year!
That is really quite a turnaround in a very short period of time, and proof that the ‘Mortgage Guarantee Scheme‘ that was launched in the last budget is doing exactly what it was designed to do – get lenders back at this level!
If you’re looking at mortgages with smaller deposits contact us to find out what’s available.
Lenders Increase Appetite For Larger Loans
Another trend we have seen in recent weeks is that the mainstream lenders are showing a real appetite for larger loans. We’ve seen a lot of high street lenders up their maximum loan size from anywhere between £1.5-3m.
The beauty of this is that it does not come with differential, or loaded pricing. High Street lenders are quite happy to take on larger loans at their existing pricing, which means if you have a 40% deposit +, you could organise a loan up to £3m + at sub 1%! At this level, we are starting to see an increased level of borrowing as this makes the arbitrage argument quite compelling (in this example, it is typically borrowing more so you can invest any surplus funds and some investment rates are well in excess of 6%, so your net return on that can be at least 5% which makes sense).
Money markets all nudged down last week. As per recent updates, the outlook is much flatter than had been the case a few weeks back but we’ll keep a close eye on this to see how that classic relationship between inflation and interest rates plays out.
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 = down by 0.005 at 0.063%
2 Year SWAP = down by 0.019% at 0.474%
5 Year SWAP = down by 0.013% to 0.704%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 0.99%
2 Year Fixed Rates from 0.83%
5 Year Fixed Rates from 0.96%
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 September 2021