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What the latest reports say about the Mortgage Market?

07.05.19

There have been a couple of interesting reports released over the past week, including the May Inflation Report and the Bank of England’s mortgage approval data which give a useful guide to the state of the property market as a whole.

Against a backdrop of Brexit uncertainty, although the Bank of England may be bearish on the UK property market, the British public, by contrast, is proving considerably less bearish, with a sharp pick-up in activity levels during the past couple of months.

One key driver of increased activity levels, as the Bank of England highlights, is the extraordinary level of competition between lenders.

This is particularly the case at higher LTVs with, crucially, far more products being created at higher loan to values, which is really empowering first-time buyers and giving them a genuine leg-up.

Not only are products priced much more competitively, but we have seen a relaxation in loan criteria. With lenders becoming more accommodating this is making affordability less of an issue compared to a year ago. The underwriting is still responsible, but loans that might have been rejected a few months ago are now getting across the line as lenders compete to get money into the market.

While mortgages approved for house purchase dipped slightly in March, expect that figure to improve significantly in April.

The two main pillars supporting the mortgage market are first time buyers and existing homeowners remortgaging onto better rates. Remortgage activity, in particular, is thriving.

As the Nationwide April house price index shows, prices are under pressure and when you factor in the competitive mortgage rates available, people are increasingly parking their Brexit concerns and getting on with their lives.

If there’s a weakness in the mortgage market, it’s amateur landlords struggling to secure finance on the back of rigorous stress-testing criteria. This is seeing more landlords move away from the high street to specialist lenders or retreat from the sector altogether.

Mortgage rates from lenders are subject to the usual competitive jostling and as such, the main headline rates have reduced a touch. For standard residential mortgages, borrowers can obtain 2-year fixes at 1.35%, (3.84% APRC) and 5-year fixes from 1.79%, (3.80% 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% (4.40% APRC).

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