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Private Finance Weekly Mortgage Memo - 4th May 2020

This is our summary of news in the mortgage market over the last week that we thought was particularly interesting. 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. 

At a glance: 

  • Brand new buy-to-let 12-month mortgage product launched targeting the current market 
  • Converging swap rates and fixed-rate mortgages initial offerings 
  • Will increased demand for purchases outside of major UK cities drive up prices following the coronavirus crisis?  

Brand new buy-to-let 12-month mortgage product launched targeting the current market

Paragon, the specialist buy-to-let lender, launched a 12-month discounted standard variable rate product last week to support new and existing landlords through the coronavirus crisis. The lender is offering free desktop valuations, along with zero product fees, making it a highly attractive proposition. 

  • This provides buy-to-let landlords with an alternative from switching to their standard variable rate with their current lender, particularly If they are struggling to remortgage or if they plan to sell their property soon. 
  • Ultimately, this reflects the current high level of uncertainty in the buy-to-let market. Products such as these may become more common due to tenants and landlords requiring greater flexibility to ease intensifying financial strain. However, it is likely this product will only work with high rental yielding properties or low LTV loans. 

Converging swap rates and fixed-rate mortgages

Swap rates for 2- and 5-year fixed rate mortgages and tenors are starting to converge, with the best buys being 1.19% and 1.41% respectively. Some borrowers will be tempted by these appealing rates, especially given the intense uncertainty in the economy. 

  • We believe there will be a sharp uptake in 5-year fixed term options moving forward as a result of this convergence.  

Will increased demand for purchases outside of major UK cities drive up prices following the coronavirus crisis? 

This crisis has posed a unique question to the UK labour market and those who are fortunate enough to be able to continue to work remotely: why should we be so geographically tied to cities in the future if we can perform the majority of our work remotely? Will companies and employees want to pay vast amounts in city centre rents after the lockdown lifts?  

  • We believe the status quo will be questioned, resulting in a rapid increase in demand for property surrounding the UK’s major cities, especially among first time buyers. Ultimately, buyers will be attracted to the affordable prices in these areas.  

Private Finance Weekly Mortgage Memo - 4th May 2020

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© Private Finance Limited, 2020. Private Finance provides independent mortgage advice and arranges individual mortgage solutions for clients. Private Finance is a trading style of Private Finance Ltd, 29 Lincolns Inn Fields, London, WC2A 3EG, registered in England no. 3855776 and its Appointed Representatives. Private Finance Limited is authorised and regulated by the Financial Conduct Authority (FCA registration number 310566).

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