Private Finance's Mortgage Memo - 12th July 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.
- BTL lenders bring in green incentives for landlords
- 5-year rates edge towards 1%
- Will rates continue to fall?
BTL lenders bring in green incentives for landlords
A number of lenders, including Bank of Ireland, Foundation, Landbay and Paragon have recently launched “green” buy-to-let mortgages for landlords with more energy efficient properties; those with energy performance ratings A, B or C.
- We are really pleased with this development, and it is indicative of how mortgage lenders can contribute to a national drive towards sustainability and greener homes. These products will hopefully encourage landlords to invest in more energy efficient properties, thus increasing the proportion of EPC A to C rated properties in the private rental sector.
- These products are also available at higher LTVs of 80% and for both purchase and remortgage, meaning they are accessible to many landlords in the BTL market.
- We hope that more lenders will follow and think that this could be become the norm going forward, especially the discounting model employed by Foundation where the amount of discount increases in line with better EPC rating.
5-year rates edge towards 1%
While the 2-year fixed rate at 0.94% gets all the headlines, 5-year rates have been quietly edging towards 1%, market leading being an incredible 1.06% with a £1,495 fee exclusively for HSBCs premier customers (if not 1.09% with a £999 fee)
- Given the recent discourse surrounding inflation and the potential for rate rises, banks and lenders seem very much unphased and these low rates show confidence in both the housing market and economy in the long term.
- These market leading rates still remain only open to borrowers with large deposits and equity, but we are seeing rates come down across the board, including at higher LTVs and these in many categories are now heading towards pre-pandemic levels.
Will rates continue to fall?
It is a question that we often get asked by clients as to what the markets next move is. It has been an incredible period for the housing and mortgage market, and it is only now after many months that house prices have stopped rising with a fall of 0.5% in June. This is indicative of the market cooling off and we suspect that it is this that may drive rates down further as lenders compete in a market with less demand…
- As discussed above, it is incredible that a 5-year fixed rate is approaching 1% and given the length of time this is incredibly cheap borrowing.
- Institutional lending rates remain low and thus lenders have a margin that they can play with to get both a better quality of client and more clients.
- We suspect we will see some further slight falls of 0.01% in the coming weeks and lenders will continue to reduce rates at higher LTVs. Right now, it does not feel that out of the ordinary that we could see a 3 and 5-year product around the 1% mark and the 2-year reducing to the 0.9% mark. Moreover, we could see more fees reduced and criteria relaxed as lenders compete across the board.