Private Finance's Weekly Mortgage Memo - 8th February 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:
- Buy-to-let mortgage market continuing to open up…
- LTI increases help FTB and second steppers alike
- Increase in remortgage enquiries show the purchase market is slowing
Buy-to-let mortgage market continuing to open up…
Despite the pressure Covid has placed on landlords and renters alike, the market is continuing to open up with lenders becoming more confident in the market following the increases in house prices in 2020 across the UK. We have seen BM Solutions and Zephyr reduce their rates of late and West One have introduced some limited-edition products which are highly competitive for their target market, as well as easing criteria to now allow HMO’s over 6 bedrooms and client exposure increasing to £3m.
- The BTL market has been slower to respond to the high levels of demand and rising prices in the housing market on account that by their very nature they are riskier lending propositions and rents have been falling, especially in cities.
- We are also seeing the return of the demand for BTL products and believe this is due to optimism created by the vaccine in addition to the very low interest rate environment we are currently in.
LTI increases help FTB and second steppers alike
Barclays have recently increased their LTI on residential products to 5.5x income and unlike the recent change to LTI from Platform, this applies to all borrowers, both self-employed and employed and not just professionals. Great news for the self-employed who have been hit hard with restrictions on borrowing due to the Covid pandemic. Until now Barclays had been at 4.49x income as a maximum after pulling high LTIs last summer with no notice for brokers!
- This also helps significantly helps First-Time Buyers and second steppers alike. House price rises have in effect eliminated savings from the SDLT holiday and in combination with the previous requirements for larger deposits and reduced LTI, it has made it harder for those either looking to get on the ladder or move up it. The difference 0.5 or 1 x income can make on borrowing can be hugely significant and could be the difference between a flat or a house in some places or a different location altogether…
Increase in remortgage enquiries show the purchase market is slowing
We have seen an increase in remortgage enquiries as a percentage of our total business, on parity with purchase business in January for the first time since the first Lockdown in March and April 2020. This highlights that the purchase market is slowing but also that people are choosing to stay put in greater numbers at present. With the end of the SDLT holiday approaching, it appears that buyers could be holding off to see what happens in this regard, but there are other factors to consider, especially lockdown and the very cold weather… more outdoor space, a major driving force for people to move in 2020 feels far less of an imperative when it is below zero.
- There are other factors at play, including a lack of supply in the market, something our agency partners have mentioned to us and this could lead to people holding off until they find the right place.
- We believe this change is temporary and we expect that we will see a boom in purchases in the summer months, very similar to 2020 in terms of a tumultuous year of peaks and troughs in demand.