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Private Finance's Weekly Mortgage Memo - 7th September 2020

This is our take on news in the mortgage market 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:

  • Higher LTV market continues to be squeezed
  • Purchase market is booming
  • Coventry launches interest-only product – a sign of the times

Higher LTV market continues to be squeezed

Very few lenders are offering mortgages at 90% loan-to-value. Those that are, such as Accord Mortgages, who launched two new five-year fixed rate 90% products this week for two days only, are set to be or are being inundated. This is prompting them to slap significantly higher rates on these products and offer them for a limited period to ward off extremely high demand. Large lenders, such as HSBC, have even stopped offering these products altogether and we also heard Platform have withdrawn their 90% offering now too. Brokers are reporting waiting times of well over an hour to run through cases with lenders who are still operating in this space.

  • It is surprising lenders have not flooded this segment of the market to capitalise on high demand. This may be due to severe economic uncertainty and the fact they are extremely busy with less risky borrowers
  • The 85% LTV will be the key battleground for lenders looking to attract new customers. Depending on the state of the economy following the end of furlough and Brexit in January, it may be the case that even this segment is squeezed…

Purchase market is booming

Nationwide’s latest House Price Index revealed a 2% monthly rise in prices, the highest since February 2004. This came as no surprise to us. We have seen a significantly higher proportion of our business coming from new purchases – for context, if we compare last month to August 2019, the proportion of business coming from purchase and remortgage has effectively reversed. In the same month last year, we saw 37% of transactions coming from purchases and 61% coming from remortgages. In August 2020, we saw 64% coming from purchases and 33% coming from remortgages.

  • The housing market is a very strange place at the moment. Although we are still in the midst of the pandemic and seeing an uptick in cases, the economic outlook is souring. However, people are continuing to buy houses in huge numbers
  • Of course, the Stamp Duty holiday is having a massive impact, but we believe high demand is mainly being driven by people re-evaluating their circumstances and their lifestyles having spent a few months within the same four walls
  • As new orders for home purchases rise, remortgage business is suffering. This provides even further evidence that people are on the move rather than staying put – all pointing to huge shifts in the market.

Coventry launches interest-only product – a sign of the times

Coventry has recently launched an interest-only fixed-rate product aimed at the lower LTV end of the market, with applicants requiring a maximum of 50% LTV and a minimum of £300k equity in the property.

  • This product is designed to attract interest from borrowers who require more flexibility and increased control over their finances. Products such as this will likely see significant uptake moving forward as people are squeezed financially
  • It is good to see another player in the interest-only market offering a hugely attractive product.

Private Finance's Weekly Mortgage Memo - 7th September 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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