Private Finance's Weekly Mortgage Memo - 18th January 2021
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:
- Rates falling across the board at higher LTV’s and a return to 5 x income at 90%
- Busy start to the New Year despite full National lockdown
- Expat rush before the SDLT deadline and additional 2%
Rates falling across the board at higher LTV’s and a return to 5 x income at 90%
This last week we have seen mainstream lenders including Barclays and Virgin reduce their rates at 90% LTV and this puts downward pressure on rates being offered in the 85 and 80% LTV bracket and so we can expect these to be reviewed too in the coming weeks. It tends to be case that lenders move as a pack and as some decrease their rates, especially large mainstream lenders, others will follow so we believe that there will be a slow reduction in the cost of borrowing at high LTVs over the next 2 months… Moreover, we have seen Accord return to 5 x income (over £60k household income) even up to 90% LTV, another sign of lenders confidence in the outlook for the property market despite the pandemic.
- It however remains the case that borrowing at higher LTVs is expensive, for example the best rate of a 2-year fixed currently is 1.05%, but at 90% LTV the best mainstream rate is 3.24% offered by Nationwide – a significant difference.
- A return to 5 x income at 90% is great news for borrowers, especially given recent house price rises, we suspect that this will be a very popular option for those wanting to buy at the limits of their affordability and drive further demand in the market for first time buyers.
Busy start to the New Year despite full National lockdown
While we are not facing the extremely high levels of demand of late summer last year, given the situation, demand remains strong and we are continuing to see a high number of enquiries as well as cases moving forward, and new offers being accepted. It appears that people are used to life under lockdown now, and with the market still open it is not stopping the appetite for people looking to move, especially with trends such as working from home and relocation for more space now entrenched.
- With the vaccine well under way we suspect that following the end of lockdown and relaxation of restrictions we will see another mini boom this year. Those who’s income has remained unaffected by the pandemic will have been able to save and there will be a new optimism in the economy as consumer spending returns in a big way – one epidemiologist has predicted the period will be akin to the 1920s following WW1 and Spanish flu.
- We predict we will see cities benefit from renewed demand, potentially including large demand for investment property in London, where landlords for instance have taken a hit throughout the pandemic with reduced rents, with the sharpest falls in the inner city, particularly the Boroughs of Islington, Westminster, and Kensington & Chelsea, which experienced falls of around 10 per cent in the year 2020 to October.
Expat rush before the SDLT deadline and additional 2%
It seems that the certainty created through the Brexit deal has led to a surge in enquiries from overseas buyers, both expats and foreign nationals looking to purchase UK property and thus requiring finance.
- We believe this is primarily being driven by the upcoming changes to SDLT, as from the 1st of April 2021 overseas buyers will be subject to an additional 2% SDLT on top of the 3% additional homes surcharge and normal stamp duty rates thus purchasers will want to complete to make savings in this regard.
- Buyers will need to get their skates on if they are to beat these deadlines, with processing times still relatively slow (if they need a mortgage) and with solicitors dealing with a backlog of work and searches taking far longer than usual.