With the European elections behind us, I am not sure anyone is any the wiser as to what the UK actually wants. When all is said and done, it seems that just under 1 million more people actually signed the Revoke Article 50 Petition than actually voted for the Brexit Party!
Looking at the rise of remain party’s like the Liberals and with Labour leadership looking likely to perform a U-turn, on whatever their policy actually was, everything is suddenly up for grabs again.
All of this plus a new Prime Minister in the offing has an effect on the housing market, which is some explanation for lower than normal transaction levels. However, the mortgage market itself has never been as competitive as it is right now.
This is because the bigger lenders are awash with money to lend due to recent rules around ringfencing. This squeeze on margins as rates race to the bottom in a bid for market share, means larger lenders are able to apply pressure on pricing that challenger banks and other specialist lenders just cannot compete with. Last week we saw Tesco Bank pull out of mortgage lending altogether, appearing to say that the numbers no longer stack up for them.
The problem for lenders such as Tesco and others is that they do not have the stamina to sustain such low margins in the medium to long term. What many other lenders are doing is looking at their criteria and sections of the market who are perceived to be underserved, such as the self-employed, contractors, high Loan-to-value mortgages, complex and large mortgage loans as well as those who have had credit issues.
If a lender feels that they can neither take on additional risk or compete on price then they are stuck between a rock and a hard place.
It’s a small blow to consumer choice but thankfully there are lenders aplenty that are financially strong and keen to get money into the market. The positive is that this is not a knee-jerk reaction but appears a reasoned and strategic withdrawal from the market.
The issue for consumers is that more power naturally flows to the top 6 lenders at the expense of others which, as we have seen in the past, is never a good place to be.
With Base Rates forecast to stay low for the foreseeable future and a relatively benign property market due to the uncertainties of Brexit, it seems that there will be no let-up anytime soon in the mortgage rate war.
Again, canny buyers can take advantage of current conditions and I suspect that those that do buy now may well be happier than those who waited in the longer-term.
For standard residential mortgages, borrowers can obtain 2-year fixes at 1.35%, (3.84% APRC) and 5-year fixes from 1.78%, (3.59% APRC) whilst variable tracker rates are around from 1.29%, (3.82% APRC).
Those looking at Buy-To-Let can still obtain products from just 1.39%, (4.71% APRC) for a 2-year tracker or 5-year fixes are available from 1.99% (4.43% APRC).