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Long-Term Fixed Rates, Government Support & The Mortgage Market

05.10.20

Coreco were on the front page of the Business section of The Sunday Times yesterday talking about the Prime Ministers’ latest interference, sorry plan, for the Mortgage Market. He is once again pushing ultra long-term fixed rates without really understanding that a) there is very little demand for these especially amongst first-time buyers, and b) lenders just could not cope with any more demand sided push in the market at present.

Although the aim of these long-term fixed rates is at 95% LTV, an area of the market lenders are struggling to, or unwilling to, serve at present, any Government guarantee scheme at this level would cause some concerns. Why should the taxpayer guarantee more people trying to get into the property market, which, if you’re increasing demand, will just increase prices further anyway?

If this was to work, the long-term fixed rates available would need to be competitive without onerous tie-ins (5-years max) and would need to be introduced at a time when lenders could actually cope with the demand, ie after the Stamp Duty holiday.

A Busy Market

Elsewhere there have been a couple of reports that are of interest. The Bank of England Money and Credit release (August 2020) showed that the market remains exceptionally busy and demand is still strong given the great lull of lockdown and the stamp duty holiday.

The change is that it is no longer first-time buyers driving the market but second and subsequent home movers.

First-time buyers are struggling with changes from mortgage lenders, with few products available at 90% LTV and income multiples and criteria becoming more conservative.

People who have decent equity in their property, secure jobs, and are looking to move away from cities to gain bigger homes and more space given the new WFH culture, are the ones best able to take advantage of the stamp duty holiday.

People who are looking to purchase a second or holiday home are also exceptionally busy. The countryside is the new city, rural the new urban.

Landlords have also had something of a renaissance as they also stand to gain from some of the lowest rates in the buy-to-let market we have seen and are no longer having to compete with first-time buyers.

It a classic tale of the haves having more, whilst the have nots have less.

Lenders continue to struggle with capacity and this, coupled with criteria and appetites changing almost by the day, means the role of professional brokers has never been more important.

House Prices

Where property prices are concerned, the latest Nationwide September HPI showed extraordinary growth, with prices up 5% year on year.

I do think that a note of caution should be applied here, however, and whilst a 5% annual rise in values sounds fantastic, the economic fall-out of Covid-19 is starting to gather momentum and price growth will soon start to fade.

It may not have landed on the nation’s doormat yet, but there’s a whole world of economic pain in the post. The question is whether this starts to hit before the end of the Stamp Duty holiday, or we are left nursing a massive hangover on 1st April 2021.

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 1.20%, (3.30% APRC) and 5-year fixes from 1.43%, (2.90% APRC) whilst variable tracker rates are around from 1.45%, (3.90% APRC).

Those looking at Buy-To-Let can now obtain products from 1.22%, (4.80% APRC) for 2-year fixed or 5-year fixes are available from 1.62% (3.77% APRC).

For more information or to speak to one of our friendly advisers please click here or call us on 020 7220 5110.

 

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