Private Finance's Weekly Mortgage Memo - 17th August 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:
- The perfect storm for rate rises...
- The new key battleground for lenders: low LTV products
- Physical valuations are back... but so are delays
The perfect storm for rate rises...
Over the course of the last few days, several issues have compounded to create what we believe is the perfect storm for rate rises. High levels of uncertainty in the market, increased risk appetite from lenders, huge demand from borrowers seeking capital, lower processing capacity from lenders and swap rates increasing for the first time in over a year all indicate a sharp rise in rates is on the horizon.
- We believe rates have bottomed out. Despite this, there will be rate cuts for lower LTV products. However, we are likely to see rate rises across the board as lenders look to increase their margins
- With a number of people set to struggle due to the economic downturn, further difficulty could arise for borrowers due to rate rises increasing costs for them in the long run.
The new key battleground for lenders: low LTV products
Lenders will continue to cut rate and fees on lower LTV products to attract lower risk borrowers. HSBC did this this week, reducing their 2-year fixed to 1.14% and their 5-year fixed to a market leading 1.34%, both with a £999 product fee at a maximum of 60% LTV.
- Any savings gained by increasing rates on higher LTV products can be passed on to those who are less risky borrowing propositions, including existing homeowners with large equity positions and those with large cash deposits.
- This space will be the key battleground for lenders moving forward. We expect to see further product innovation in this area.
Physical valuations are back... but so are delays
During the height of lockdown, we commented on how efficient lenders were in the face of the huge increase in online valuations. We believed this indicated a new normal going forward. However, many lenders are reverting back to physical valuations and relying on valuers’ comments.
- The market is being driven by trepidation at the moment. This could be a measure of high levels of uncertainty and extra lender caution due to large predicted house price falls in the coming months.
- This is leading to delays in processing and extending offer times with some lenders.
- Once market activity stabilises, we hope more lenders will return to using online valuations as they benefit all parties in the mortgage process.