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Private Finance's Weekly Mortgage Memo - 23rd 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:

  • Government finally stepping in to help homeowners caught in the EWS1 process
  • Are 90% LTV mortgages back?
  • Increase in enquiries capital raising for home improvements
  • Nationwide extend their interest only and part and part option to home movers

Government finally stepping in to help homeowners caught in the EWS1 process

After years of current homeowners, brokers and surveyors highlighting this as a major issue the government have finally stepped in and are taking action to release tens, if not hundreds of thousands of mortgage prisoners, by making their properties mortgageable again so they hopefully sell or remortgage without months of delays and expenses. Owners of flats without cladding will no longer require an EWS1 form, and there are approximately 450,000 owners who will benefit from changes.

  • This is excellent news and one which we are very happy to hear, given the misery this has created for owners. As brokers who specialise in arranging finance for borrowers with complex cases, we have come across a large number of these enquiries in recent years and they have put owners in incredibly stressful financial positions.

Are 90% LTV mortgages back?

It has been a tough time for borrowers with low deposits, and for a time they have in effect been excluded from the market altogether. However, Accord, who had been flirting with this space for some time, offering products at this LTV for a day here and there are re-introducing a 90% LTV product into their core range.

  • With Christmas approaching and the buying frenzy that was the summer slowing down lenders will have more capacity and are able to look at these cases again, as opposed to focusing on lower risk business.
  • We had suggested previously that with the announcement of the vaccine and the end of the Covid crisis in sight lenders would return to this space as the outlook for the housing market now looks safer in the long-run, especially with the recent increases in house prices. However, the cost of borrowing at this level remains high at 3.69% for a 2-year fixed or 3.79% for 5-year fixed, the reason for this is two-fold, firstly it prices in the risk of a large fall in prices and secondly and quite simply they can… there is huge demand in this space and people are willing to pay for it…
  • We expect other lenders to follow suit in the coming weeks and if so hopefully rates will reduce with the additional competition.

Increase in enquiries capital raising for home improvements

While the growth in the purchase market has been widely documented, we have also seen an increase in the number of enquiries for capital raising for home improvements. This is very much borne out of the Covid pandemic and may actually be borne out of the increase in house prices as people decide to stay where they are and improve their homes instead of moving… The primary focus of these enquiries has very much been about increased space for homeworking, whether that be an extension for an office or structures in the garden, again a sign of the times…

  • This is great news for the construction industry and will likely be a long term trend as people spend more time in their houses and are likely to do so going forward with the changes to the way a lot of people work.
  • This could spell more bad news for central London property, with Sadiq Khan warning London faces an existential threat, more people extending homes in the suburbs combined with people leaving altogether is indicative of this threat and the shift we have been witnessing…

Nationwide extend their interest only and part and part option to home movers

Interest only and part and part interest only and capital repayment product has been extended to home movers by Nationwide this last week and is exclusively available to brokers. The terms are somewhat restrictive and ultimately this is aimed at the higher end of the market as it is not available to first-time buyers and comes with a maximum LTV of 60%, minimum income requirements of £75k for sole applicants and £100k for joint and minimum equity requirements on top of this. However, this does provide borrowers who tick the criteria, with increased affordability if they desire it and although it somewhat reflects other lenders propositions in this space it is another great tool to add to a brokers belt.

  • This does provide borrowers, who tick the criteria, a good option to reduce their monthly payments and thus free up cash for investment or simply to spend on whatever they would like other than their mortgage.
  • This is also a good option for high earners with lower basic incomes but large bonuses or commission as interest only enables lower monthly payments but provides borrowers with the ability to make overpayments as and when. 

Private Finance's Weekly Mortgage Memo - 23rd November 2020

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© Private Finance Limited, 2021. 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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