Private Finance's Weekly Mortgage Memo - 21st July 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:
- A sign of the times: Barclays becomes the latest lender to embrace increased flexibility in its product offering
- Stamp duty cuts will increase demand for sub £500k properties - impacting rental supply
- The return of 90% loan-to-value (LTV) lenders
- Holiday let mortgage market goes from strength to strength
A sign of the times: Barclays becomes the latest lender to embrace increased flexibility in its product offering
Barclays is the latest lender to focus on flexibility in its product offering, this time with a change to general criteria not just bringing back but enhancing pre-covid terms. Barclays has increased the LTV on its part-and-part products to 80%, meaning borrowers are able to pay 50% of the loan on an interest-only basis and the remaining 30% on capital repayment and interest, whereas this arrangement used to be at a maximum of 75%.
- We will see increased product innovation such as this, as lenders look to attract new business during this period of economic uncertainty.
- Offers of this nature are good news for borrowers who may want to reduce their monthly outgoings at this uncertain time.
- Another interesting feature is another change to Barclays' criteria regarding customers' employment - it is no longer a requirement that they need to be with their current employer for three consecutive months and rather just need to have been employed for those three months with sufficient history of employment. This is very much a sign of the times and indicative of the current state of flux in the labour market.
Stamp duty cuts will increase demand for sub-£500k properties - impacting rental supply
We have already noticed increased demand for mortgages since the Chancellor's Stamp Duty announcement and we believe this cut will lead to a huge demand in properties in the £300k-£500k range. This may lead to an increase in property prices in this bracket, with increased competition meaning that sellers stand to benefit from a change aimed at stimulating buyer activity.
- Landlords may take advantage of the demand for sub-£500k properties and sell their properties which could affect rental supply - increasing the cost of renting and pushing up landlords' yields.
The return of 90% LTV lenders
Platform, Coventry and Nationwide made the first moves and now Metrobank has returned to lending at 90% LTV. This is likely a result of the strong post-lockdown demand in the housing market, where those lenders who take the plunge first stand to make gains in terms of new business.
- We believe more will follow and imminently, and then all eyes will be on the lender who is brave enough to return to 95% LTV first before others follow suit. However, given the uncertainty in the market and the wider economy, this may be a step too far at this stage and lenders will continue focusing on serving borrowers on lower LTVs with measures like rate reductions and cuts to product fees.
Holiday let mortgage market goes from strength to strength
Coronavirus will likely lead to boom in the domestic holiday market over the next couple of years, and this presents an attractive opportunity for investors in the holiday let market. It is also an opportunity for lenders to capitalise on new business and so Leeds Building Society has just relaunched a new fixed-rate holiday let product up to 70% LTV.
- With rates for holiday let mortgage products higher than a standard residential mortgage, this is a lucrative area for lenders, and we expect to see an increasing number of product offerings here.
- While many potential investors will be hoping to pick up a bargain, stamp duty changes and shifting demand as white collar workers seek to move out of cities may scupper their chances and prices may rise in popular holiday spots in both the short and medium term.