This 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.

  • Significant increases in BTL mortgage rates
  • Could the cost-of-living crisis drive homeowners and prospective purchasers to make greener choices?
  • The growing market for self-build houses

Significant increases in BTL mortgage rates

While residential rates have been rising regularly in anticipation of the base rate rise last Thursday, BTL rates remained incredibly low. We know from some lenders that they are looking to grow their market share in this sector and with the sector looking resilient it appeared that they were going to hold off increasing rates if possible. However, following the rise last week we have seen significant increases in the best available 2 and 5-year fixed mortgages, increasing by 0.5% and 0.22% respectively.

  • The “best rates” or lowest rates were always quite disconnected from the rest of the buy to let market as they were rarely recommended due to their lack of incentives (no free valuation, etc) and their extremely high product fees, but we have seen upwards pressure on a lot of buy to let mortgages over the last week or so. It is interesting that this pressure although seen slightly, hasn’t been seen as prevalently in the more specialist and LTD company buy to let sector, so there are still some great deals to be had.
  • With inflation at a 30-year high of 6.2% in the 12 months to February 2022 we can expect further base rate rises this year and this will impact mortgage rates across the board. We are all feeling the rising costs, especially at the pump and the tills, and the ensuing cost-of-living crisis may also push rents down as renters’ affordability is constrained in the same way as buyers with less relative income.

Could the cost-of-living crisis drive homeowners and prospective purchasers to make greener choices?

With a potential recession on the cards and inflation predicted by some analysts to peak this October at a staggering 9.5% as a consequence of the war and energy price cap changes – a 2.25% increase on the peak initially expected in April from CPI projections – many households will be looking to cut down their household bills and prepare themselves against future cost rises, including making their homes more energy efficient. These factors will all inadvertently help the country take a step towards reaching national emissions targets, and with around 15% of the UK’s emissions coming from our homes, this is a positive outcome to what is otherwise a difficult situation for many.

  • Some households may make more sustainable choices, looking to retrofit their homes, install greener heating equipment such as heat pumps and improving insultation with the aim to save money on household bills.
  • We suspect also there will be a growing demand for properties with higher EPC ratings as people seek out more energy efficient homes which cost less to heat, which simultaneously, may incentivise more households to make their homes greener when they come to sell, all of which we believe will increase the demand for green mortgage products that reward borrowers for making more sustainable choices.
  • We may also see older homeowners sell and downsize on account of the increased cost of running their homes and this will free up supply for younger buyers looking to move up the ladder. Interlinked with this, we would like to see changes to SDLT in the future to make downsizing less prohibitive.

The growing market for self-build houses

We have seen an increasing number of clients and new enquiries alike looking into self-build mortgages to acquire their dream homes in the wake of limited housing stock in the market. This links to the rise in borrowers looking to capital raise on their existing properties for home improvements. The UK needs more new homes, and this is an area the government is keen to support with the implementation of the “Help to Build” scheme last year.

  • Self-builds are a lengthy process and so often people will enquire with regards to financing at a very early stage, even before a plot is found and it may take a couple of years for the right plot to come along.
  • There are significant savings and capital gains in undertaking a self-build compared to buying an existing home, however the process can be highly stressful and with the increasing costs of construction materials, self-builders need to have contingency plans in place for extra costs that can emerge during the process.
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