The Final Quarter – Bank of England, Rate Wars, Budgets and Innovation

It is extraordinary to think that we are already approaching the all-important final quarter of the year, traditionally a peak in the house buying cycle as buyers look to be “in for Christmas” and mortgage lenders try to get as much business in as possible to start the next year in fine fettle.

This year, it seems, is even more important for lenders as we find ourselves in the midst of a rate war that has been buoyed by a more favourable lending climate once more.

As you read this, buyers with a healthy deposit could now obtain a mortgage at 3.74% (6.40% APRC) on a 5-year Fixed Rate, whilst 2-year fixes have fallen below 4% for the first time in an age.

Those remortgaging could now obtain similar levels, and whilst it does not seem that rates could fall much lower in the short-term, SWAP rates, (the cost of future funds upon which lenders base their fixed rates on), have eased slowly lower.

Bank of England Base Rate Decision

This may have been tempered slightly by the ever-cautious Bank of England’s Monetary Policy Committee, (MPC), and their recent decision to maintain the Bank Base Rate at 5%. They voted 8-1 to retain the status quo, with one member voting for a cut, as they keep a beady eye on the stubbornly sticky core and services inflation figures, especially after recent public sector pay rises.

Market expectations, however, still hold firm to the belief that there will be one more rate cut this year, probably in November, before a steady fall in Bank Base over the course of 2025. If everything stays on track, Bank Base could be around the 3.75% mark by the end of next year, with some of the larger investment banks predicting things could fall faster to around 3% by the end of next year.

However, as we have seen in recent years, anything can change and probably will!

The Budget

Sentiment is everything in the property and mortgage markets, and with borrowers now more comfortable with the new lending landscape, many in these markets are cautiously optimistic about the future. The biggest worry is the political one, and we can only hope that the Halloween budget does not deliver a House of Horrors that derails the positivity train.

Some of the biggest concerns are around Capital Gains Tax, which the Institute for Public Policy Affairs has already said should be equalised to the 40% income tax level for higher-rate taxpayers. Landlords and second property owners are also worried, whilst VAT on private schools, potential changes to Inheritance tax and non-dom rules have all had an effect at the higher end of the market.

What is interesting to note is that many canny buyers do not want to play the wait-and-see game any longer. Many think the Government’s rhetoric will change to be more positive; the budget may not be as harsh as some fear, and people stalling now allows others to take advantage of a softer market.

House prices have continued to prove robust, with Nationwide reporting prices 2.4% up on last year in August. Again, unless something big politically happens it is hard to see any fall in the foreseeable future, and it should be remembered that the modest 3% rise each year that many predict over the next five years, means a 15% increase overall, outweighing the savings made by slowly falling interest rates.

More Borrowing Power and Lender Innovation

At Coreco, we pride ourselves on being at the cutting edge of mortgage innovation and are continuously working with lenders to bring our clients the most competitive and forward-thinking products available in an ever-evolving landscape.

To that end, I thought it would be useful to highlight a few recent products that could help buyers, all of which we can provide much-needed advice on:

Skipton’s Track Record Mortgage at 100% LTV

Skipton Building Society has made a significant splash with its new Track Record Mortgage, allowing for a 100% Loan-to-Value (LTV) ratio. This bold move is designed to help first-time buyers and those with a strong rental history but lacking substantial savings.

They have recently tweaked this further to help more borrowers and potentially lend 100% LTV on New Build flats!

Accord’s £5,000 Deposit Mortgage

Accord Mortgages is making waves with its innovative £5,000 deposit mortgage. This product is set to appeal to those who might have struggled to save up for the traditional deposit requirements. It’s an interesting option for buyers who have a stable income but have been held back by the initial cost of entry. Buyers up to £500,000 can get a mortgage with just a 1% deposit.

Long-Term Fixed Rates

April Mortgages are a new lender to the UK, and Coreco is one of only a small handful of brokers that have access to them. They offer long-term fixes up to 15 years at up to six times income for the right borrower. Together with Perenna, another innovative new lender, the key is the flexibility built into the product that makes them different to the traditional long-term fixes of the past.

High Net Worth Large Loans

Again, Coreco are one of only a handful of brokers, who have access to Danske Banks’ excellent High Net Worth team. So, for any borrowers looking to borrow £750,000 or more, and want a bespoke approach at great rates, our specialist brokers can advise if this is the best option for you. In fact, in the large mortgage loan arena, there are several excellent lenders who are now once more active and keen for business.

First-Time Buyer Boosters

Generation Home offers a distinctive mortgage proposition designed to help first-time buyers, especially those struggling with affordability, access the property ladder more easily. Their standout features include the “Income Booster” and “Deposit Booster” products.

The Income Booster allows family members or even friends to contribute to the mortgage without appearing on the property deeds, whilst the Deposit Booster allows external parties, like family or friends, to help first-time buyers with their deposit, either as a loan or for an equity stake in the property.

Skipton Building Society also has its own version, Income Booster, also known as Joint Borrower, Sole Proprietor (JBSP), which allows up to 3 extra people to a mortgage, without making them a legal owner of the property. They factor in incomes from all applicants, which could allow them to borrow more than if they were taking out a mortgage on their own. All borrowers will then share the legal responsibility for paying the mortgage.

Higher Income Multiples

We have also seen some mainstream lenders like Nationwide and Halifax, join others like Atom Bank and Principality in increasing their income multiples, to between 5.5 times to 6 times income for the right customers.

With lenders also changing their affordability stress tests as interest rates have begun to fall, you may find that you can now borrow more today than you could a few weeks ago.

Of course, all these products need down-to-earth, professional advice, which coincidently is what Coreco specialise in!

So, to speak to one of our friendly advisers please call us on 020 220 5110 or click here

We will continue to keep you abreast of all the latest developments here.