There has been lots of talk about mortgage pricing over the first few weeks of the year and it is interesting to see the conflicting forces in this area at work.
On the one hand, you have simple competition, with lenders cutting rates once more to their bare bones in order to get that much needed quick start to the year. Many of the bigger lenders have been quick to do this in every key product range, with competitive products launched whether you have a 40% deposit or a 5% one.
With first-time buyers and those looking to remortgage showing as the real growth parts of the mortgage market, this is where lenders are concentrating much of their early efforts.
According to UK Finance, first-time buyer mortgage transactions were up 5.8% in November last year, representing a 9.1% growth in value year-on-year. The average first-time buyer is 30 and has a gross household income of £42,000.
Whilst remortgage activity eased a touch, this was after hitting its highest level for a decade the month earlier.
The specialist market for more complex loans and the Buy to Let arena as well have also seen a growth in competition and an easing of rates.
That said, there is still much debate around the fact that higher funding costs for lenders are lurking just around the corner.
The continuing Brexit shambles and overall health of the Global Economy seem to have started to weigh down on the providers of some funding lines, with Fleet pulling out of the market until their new tranche of funds is agreed and Secure Trust Bank considering their position.
Although many may be quick to proclaim, “here we go again” the reality of the situation may not be so cut and dried. Of course, those providing funds to the specialist lenders are going to be a little more cautious, at least until some semblance of a Brexit deal is hammered out, but this does not follow that there is a funding crisis.
It is hard for many of these lenders to compete in a crowded market without cutting rates too low that means they do not make the returns they need or changing criteria dramatically that could earn them disparaging glances from the FCA or PRA.
With even more lenders poised to enter into the market and traditional mainstream lenders looking at elbowing their way into high margin activities, things are not going to get any easier any time soon.
It is likely, therefore, that this particular issue remains in the specialist lending market and we have not seen a massive effect on SWAP rates themselves which have stayed stable over the past month. There is so much noise in the economic and political world at the moment that it is sometimes hard to see what the real underlying trends are.
Of course, an 11th-hour deal, which is traditionally what happens (and what I suspect will happen), or even a second referendum could well be the catalyst for a surge of good feeling, more certainty and increased demand in the property market.
This in itself could trigger a return to interest rate rises from the Bank of England, but we would all be in a much better place. Whether “in” or “out” a degree of certainty and confidence changes everything.
It looks likely that lenders will continue to offer competitive products in the short-term, especially at the start of the year when they will be keen to get off to a good start. For anyone looking to remortgage the next 3 months or so could be the best time to bag a low rate.
Mortgage rates are still wildly competitive. For standard residential mortgages, borrowers can obtain 2-year fixes at 1.39%, (4.80% APRC) and 5-year fixes from 1.82%, (4.19% APRC) whilst variable tracker rates are around from 1.38%, (4.77% APRC).
Those looking at Buy-To-Let can still obtain products from just 1.44%, (4.44% APRC) for a 2-year tracker or 5-year fixes are available from 1.99% (4.06% APRC).