Private Finance's Weekly Mortgage Memo - 21st September 2020
This is our take on recent news 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.
At a glance:
- Lenders pushing borrowers towards longer terms
- Significant rate changes from mainstream lenders
- Marsden withdraws all products for intermediaries with immediate effect
Lenders pushing borrowers towards longer terms
Halifax has recently withdrawn all two-year remortgage products and launched several three-year products. At lower LTVs (<60%), these products are extremely competitive at 1.17%, marking a significant interest rate cut for this product type. This follows Accord offering 90% LTV products on from today for two days only, but only for five-year terms (and with high interest rates at 3.59% to account for both the demand and high risk at this level).
- OUR TAKE: Lenders are reneging from two-year fixed products and encouraging borrowers to take longer terms to ride out the wave of uncertainty and possible falls in house prices in the coming months.
- OUR TAKE: Three and five-year products will replace 2-year products as the key battleground for lenders competing for business. Given the low cost of borrowing. institutional level lenders are able to be quite flexible with their offerings.
- OUR TAKE: Longer-terms may not be for everyone. They suit second-steppers and are not necessarily the best choice for first time buyers.
Significant rate changes from mainstream lenders
We have seen significant increases from Santander and Halifax, with the former increasing rates at 85% LTV by 0.3% on a two-year fixed product, and the latter increasing their rates at 80% LTV or higher by 0.57% on two-year products. Halifax has also changed its higher LTV banding, increasing it 10 percentage points to 75% from 85%, where changes were previously in increments of five percentage points.
- OUR TAKE: Lenders are operating with extreme caution. However, strong demand in the housing market is enabling them to act like this. Lenders are seeking to increase margins on higher-risk borrowers to account for severe economic uncertainty, and they are able to do so without reducing demand.
- OUR TAKE: On the flip side, lenders are also reducing their fees and rates at lower LTVs, with Halifax removing the fee altogether on five-year 60% LTV products for remortgage. These lower-risk lending propositions are becoming the key segment of the market for lenders at present.
- OUR TAKE: We expect to see other lenders follow suit and increase rates at 85% LTV. Depending on the state of the economy moving forward, these rate rises could creep into lower LTV bands.
Lender Marsden withdraws all products for intermediaries with immediate effect
Marsden withdrew all products from the intermediary market last week due to unprecedented demand and so it can “focus on improving service standards”. Given increased processing times from lenders, withdrawals like this are to be expected to continue even if it is just a short-term fix.
- OUR TAKE: Marsden offered the market-leading rates for ex-pat buy to let products. There is significant interest from this type of borrower at the moment. They will be facing higher rates in the coming weeks unless another lender reduces its rates or other lenders who withdrew their offerings to this market due to COVID return.
- OUR TAKE: These high levels of demand and delays to processing are not limited to Marsden. Anyone looking to purchase or remortgage in the near future should get the ball rolling as soon as possible to avoid either missing out on a property or ending up on a standard variable rate.