Private Finance's Weekly Mortgage Memo - 9th November 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:

  • 90% LTV market tentatively opening up
  • Significant differences between the best remortgage and purchase rates
  • Mortgage and housing market continue to defy the economic forecast

90% LTV market tentatively opening up

The higher loan-to-value end of the mortgage market has faced significant restrictions in the wake of Covid, with lenders retreating from this marketplace altogether or increasing rates significantly. However, with house prices continuing to rise and demand in the market high this end of the lending market may be opening up – albeit tentatively with lenders still remaining cautious… Lenders, like Accord have been popping in and out of the 90% market over the last 4 months but only allowing 90% applications for a day or two and they did the same last week but extended their offering so we enjoyed over a week of 90% mortgages.

  • This is a sign that, unlike previously, they were not absolutely inundated with new applications and have capacity to deal with more, this was one of the major reasons other lenders were hesitant to re-join the market. Thus, whilst this is a welcome return for many borrowers, it could also be indicative of a slowdown in the market and in demand in general…
  • Specialist lender Aldermore also extended their lending options at 90% to include some quirky situations and with non-perfect credit scores in some circumstances too.
  • This could all point to the fact it may not be long until one of the major players re-enters this market… Ultimately, no lender wants to be holding a huge amount of these types of loans if there is a price crash, but the market is continuing to defy the odds and lifestyle changes are arguably the big driving force, flying in the face of the economic reality facing the country so it could be a question of who dares wins…

Significant differences between the best remortgage and purchase rates

Despite rising house prices, the best mortgage rates available remain for those with large deposits or a large amount of equity in their homes and thus lower LTVs. However, even with a large deposit, the cheapest rates in the market on a 2, 3 and 5-year fixed are only available to those remortgaging… For instance, the best rate available on a 2-year fixed is 1.15% on a remortgage, but 1.2% for a first-time buyer or home mover. On a 3-year, 1.27% for remortgage and 1.36% for FTB or home mover and lastly on a 5-year term, 1.32% for remortgage and 1.41% for purchase…

  • These are quite significant differences, and could be indicative of the fact lenders believe the market is overheating and the prices people are paying reflect a demand created by the unique set of circumstances currently and this will subside, ultimately resulting in prices falling.
  • Lenders are still looking to compete aggressively on the lowest risk lending propositions in the market and those who have mortgages (providing their circumstances have not changed for the worse) have a proven track record of making payments and own property that for the most will have increased in value since purchase at the earliest 2 years ago if remortgaging now.

Mortgage and housing market continue to defy the economic forecast

With the price of the average home rising to over £250k for the first time and demand high, you could be forgiven for forgetting that we have just seen the biggest fall in GDP since 1706 with a 21% decline in the second quarter of this year, unemployment continuing to rise and the spectre of a no-deal Brexit still hanging over us… Despite all this the housing and mortgage market continues to boom, even with the second of Covid underway. For context as to the scale of mortgage borrowing at present, Lloyds, the largest lender in Britain lent £3.5 billion between July and September of this year, which is the total amount of mortgage business they wrote in the whole of 2019…

  • Whilst the SDLT Holiday is obviously a driver, we believe we are seeing a more fundamental shift in terms of lifestyle and thus what people want from a property. The focus is no longer city-centric and as affluent, white collar workers move out in the search for more space prices will continue to rise across the board as they have more room to grow in areas outside of the Capital and other city centres…
  • With the market continuing to defy the odds the question from a mortgage perspective is will lenders start being more bullish and re-introducing higher LTV products and reducing rates or will their cautiousness prove right in the end…

Private Finance's Weekly Mortgage Memo - 9th November 2020


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