Private Finance's Weekly Mortgage Memo - 21st June 2021
This is our take on what is currently happening 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.
- Rates are not enough: Lenders need to increase flexibility
- The realities of sub-1% mortgages
- The race to save up to £12.5k: Buyers in final push to beat SDLT holiday
Rates are not enough: Lenders need to increase flexibility
With longer term rates at record lows, you would think that borrowers may be tempted to choose these types of mortgage product, yet we are still seeing far greater interest in shorter terms. We believe the issue here is the lack of flexibility from lenders and not enough product innovation. We would like to see greater flexibility going forward in the latter half of this year to give borrowers greater options. Given the nature of recent events, we have seen some huge paradigm shifts in society, including of course peoples living requirements, and the dynamic time we all find ourselves in means borrowers are not prepared to commit to longer terms. This remains the case even if it is in their best interests in terms of cost efficiencies on account of the fact they are wary of what could happen.
- Given the very low cost of borrowing for lenders, we would like to see reduced early redemption charges on longer term products or offering flexible, fixed longer-term rates with no ERCs at all, albeit at a slight premium.
- There have been some products like this historically, for instance a 5-year fixed with 3-year ERC, or a 10-year fixed with 5-year ERC, however these products have always come at such a premium as to be unattractive for the majority of borrowers.
- Another product we believe there is call for is tracker for term products (i.e., a product that is say 1.5% + base for the 20 years of the mortgage) to minimise remortgage costs for borrowers every few years, this would be especially good in the buy to let market.
The realities of sub-1% mortgages
We have all seen the recent headlines that we are now in sub-1% territory for 2-year fixed rate mortgages with the best available rate at 0.95%, however these rates are not all they seem, and are in fact only available to the highest quality of clients, for instance those with absolutely perfect credit score and an LTV of 60% or lower.
- These types of rates come with high fees, and thus the level of borrowing needs to be high to justify this additional cost.
- We have a number of enquiries from potential borrowers who have seen the fact the best rate is 1% and thus are confused when the best available rate for their circumstances is around the 3% mark, so while incredibly low rates are available in the market it remains a case of to those who have more shall be given…
The race to save up to £12.5k: Buyers in final push to beat SDLT holiday
We are hearing from a number of solicitors that they are under intense pressure from clients at the moment to complete before the 30th of June, the deadline for the winding down of the SDLT holiday and last chance to make significant savings especially if buying at £500k or above. Some solicitors have issued notifications to say that there is no guarantee of this happening now and others have had to call for calm from clients with one email signature of a firm we shall not name stressing the need to remember to be tolerant, kind and understanding to each other… such is the clamour to complete…
- We suspect that this deadline will lead to a drop in enquiries as buyers readjust their finances to the additional costs of SDLT. Moreover, given the number of transactions that may not meet this deadline and could thus potentially fall through, we could seem some chain collapse…