Private Finance’s Mortgage Memo

is our take on what is currently happening in the mortgage market. Our views
are often cited in several national publications, including; BBC News, The
Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of
key trade publications, so this should keep you ahead of the curve. If you have
any questions on any of these stories, or would like further information,
please do not hesitate to get in touch.

  • Lenders offering better rates for existing clients
  • Sharp rise for 2-year fixed mortgages amid economic concerns
  • Doom and gloom on the horizon for FTBs as Help to Buy ends?

Lenders offering better rates for existing clients

We have noticed some lenders have been increasing new business rates while keeping existing customer rates the same where they are able to do so. A few examples include Barclays, NatWest, Santander, Metrobank and Nottingham BS.

Why are existing clients receiving better rates?

Lender service levels have been disrupted for a while now. The cost of acquiring new business has been amplified by longer waiting times and higher fall-through rates. As a result, the benefits of retaining existing clients are higher as these clients are less costly to service having already been onboarded, it makes sense to try to retain this business by offering more competitive rates.

While this is a good thing for existing clients and makes it more worthwhile to stay with your existing lender, most lenders will only allow a product transfer 3 to 4 months before the current rate expires. However, most borrowers are now looking to lock their rates in as early as they feasibly can, between 6 to 7 months in advance.

This presents a trade-off of whether the borrower will be able to secure a better rate earlier with another lender before rates increase, or if they will be rewarded waiting and staying with their existing lender. This in a way is causing more work for brokers, the best advice usually being to secure a remortgage as early as possible then re-look at things nearer to the time of product renewal potentially then doing a product switch instead.

Sharp rise for 2-year fixed mortgages amid economic concerns

We have witnessed significant increases in the best available mortgage rates this past week, both for residential and BTL mortgage products. The most significant being in the 2-year fixed rate residential product which increased by 0.33% this last week.

Why are mortgage rates rising?

Mortgage lenders have been increasing their rates quickly and frequently, to reflect the continued volatility in swap rates and in anticipation of a base rate rise in the next MPC meeting (22nd September), this meeting being delayed by one week in light of the period of national mourning now being observed in the United Kingdom.

The best available 2-year fixed rate is now 0.07% higher than the best available 5-year fixed rate, mirroring the rate difference we are seeing in the Sonia swaps currently. While there were increases in the best available 5-year (0.15%) and 10-year (0.05%) fixed residential products too, the increases were smaller than the 2-year fixed, suggesting lenders are more concerned over the economic environment during the next 2 to 5 years.

Doom and gloom on the horizon for FTBs as Help to Buy ends?

Help to Buy: Equity Loan

The Help to Buy: Equity Loan, which the government announced in 2018, gave an equity loan towards the cost of buying a new-build home as a first-time buyer. The deadline for new applicants closes on the 31st of October 2022, yet another loss of support for FTBs amid a cost-of-living crisis, expensive rents, and rising interest rates.

How will the end of HTB impact first-time buyers?

First-time buyers are faced with substantial barriers getting onto the property ladder at a time when the rental market faces a significant imbalance of supply and demand, amplified by landlords exiting the market, and leading to a surge in rental prices. The average rent increased by £115 over the last 12 months according to the latest Zoopla report, outpacing earning growth throughout the UK. This increase in rental prices paired with a cost-of-living crisis makes it even harder to save for a deposit unless living in a family home. There are also other barriers such as rising interest rates, house prices, and inflation impacting lenders’ affordability calculators which now affect first-time buyers.

Young people face incredible challenges now as both renting and buying a house are made more challenging by the housing market and economic environment. While there are other government schemes such as Shared Ownership, more support could well be required for FTBs in the long term.

If you have any questions on any of these stories, or would like further information, please do not hesitate to get in touch.

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