So here we are after a long, hot Summer; back with a vengeance. As the kids start to go back to school (finally!) and tans start to fade, the last part of 2018 is predicted to be a very interesting one.
Coreco have started in positive fashion having been shortlisted again as Best London Mortgage Broker at the National Mortgage Awards having won the title last year and there is an expectation that we will have a busy run to the end of the year. It does seem house prices have eased a touch, potentially leading to more activity as buyers are enticed back to the market whilst mortgage rates show no interest in rising further.
We have seen little change in the cost of funds since the last rate rise and I suspect we are now looking at a relatively benign period for rates in general. Certainly nothing should happen now before we know more about Brexit. If anything, interest rates may need to reduce again if no deal is sorted out!
Meanwhile, the preamble is starting to build for the Autumn Budget, with the usual “what will he do” questions beginning to surface. As has become normal in recent years, now is the time different ideas are fed to the public to try to gage some kind of reaction before a final announcement is made.
The first of these seems to be whether Help-to-Buy will be extended or not, something Coreco discussed on LBC Radio on Sunday night. This is a scheme that since its inception back in 2013 by then Chancellor George Osborne, has had more than its fair share of criticism. As time has worn on, this criticism has gained traction and is reaching fever pitch.
Amongst all this cacophony of noise, it is easy to forget why the scheme was implemented in the first place. At the time few lenders were offering any 95% Loan-to-value mortgages, First-Time Buyers were in relatively short supply and builders did not have the confidence to build because they did not know whether there would be an end customer.
Help-to-Buy therefore, was as much a crutch for builders and developers than it was for First Time Buyers, enabling them to build, sell and build again. In some respects, it was meant to address some of the supply side issues, but it mainly acted to exacerbate demand whilst in general supply remained constrained.
As with anything that stokes demand, this then meant that builders were able to increase prices, which coupled with ultra-low mortgage rates led to the situation we have today with many of the initial fears of the scheme having come true.
It is undeniable that there are many happy property owners, some 170,000 families have been helped since inception, who would not have been able to get onto the property ladder without it, but it is interesting to note that of this figure a fifth were not actually first-time buyers at all.
It should also be noted that the average income of an applicant applying for Help-to-Buy now stands at £50,000, (a staggering £72,000 in London), which critics say is therefore helping the wrong type of people. Of course, the reason incomes have risen is because higher prices mean that only those with higher incomes can meet the mortgage affordability rules! You see the issue.
For all this, lenders and developers are very keen to keep this going as long as possible and it does look as if it will be extended another couple of years past the current March 2021 end date, to 2023. This extension however, may well come with various changes.
We could well see a change in terms of limiting the scheme to First-Time buyers only and possibly an income cap for applicants or a reduction in the £600,000 upper limit for property values.
The good news is that lenders are increasing their supply of 95% LTV rates with new lenders coming back into this market all the time and existing lenders reducing their rates. In fact, borrowers now have some really good choices with only a 5% deposit so are no longer just reliant on Help to Buy. Interest rates are available from around the 3% level which is historically very competitive indeed.
Elsewhere, borrowers can still get 2-year fixes are available at 1.39%, (3.72% APRC) and 5-year fixes from 1.83%, (3.88% APRC). Variable discounted rates are around from 1.24%, (4.51% APRC).
Those looking at a Buy-To-Let can still obtain products from just 1.39%, (4.57% APRC) for a 2-year fix.