Private Finance's Mortgage Memo - 13th September 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.
- Purchase market slowing
- Not just rates at rock bottom, but also arrangement fees
- Lenders return to pre-Covid criteria (almost)
Purchase market slowing
We have seen a significant shift towards remortgage business in the last 2 months, with this trend accelerating in August. This points to an interesting picture in the housing market, with demand high, but supply highly constricted. We have a number of clients who would like to move but cannot find what they are looking for and even if they do may be involved in a bidding war to secure said property. However, it is also indicative of the low mortgage rates on offer with many homeowners seeing this as a time to take the opportunity to remortgage and potentially release equity in their homes, possibly for renovation, of gifting deposits to children and the like.
- With life resuming post-Covid restrictions ending the usual seasonality of the housing market seems to have resumed especially as people venture off on holiday, we may see a significant increase in purchases if supply allows in the run up to winter.
- It is also important to consider just how busy the last 12 months have been in terms of purchases, with people bring transactions forward, in some cases by years not months and thus while there is demand and prices are rising on account of this, this slowdown in enquiries for purchase finance could be a sign of a market on the verge of cooling off dramatically.
Not just rates at rock bottom, but also arrangement fees
The best available mortgage rates are incredibly low at present, with the 2, 3 and 5-year fixed at 0.84%, 0.89% and 0.94% respectively. Usually, lower rates command higher arrangement fees as lenders, like to have the headline best available rate on offer, but also do not want to erode their margins too much. But such is the low cost of borrowing and demand in the market, arrangement fees across the best in market board are sub-£1,000 (https://www.privatefinance.co.uk/best-buys).
- Competition amongst lenders remains fierce and they want the best quality borrowers. These best rates are only available to those at low LTV’s, with unblemished credit files and not in complex scenarios, and these borrowers are being rewarded with further savings at present.
- Although not a significant amount, the savings in arrangement fees is circa £500, these fees are usually added on to the mortgage and thus become part of the debt to which you will pay interest on and so it is not just an upfront saving but one that affects you across the lifetime of your product.
Lenders return to pre-Covid criteria (almost)
We continue to see lender the changes lenders made to their criteria in the wake of the Covid pandemic be removed, with Halifax recently relaxing their restrictions around overtime, bonus and commission payments and reverting to pre-Covid levels having previously dramatically cut the percentage of these incomes they would consider.
- We are seeing these changes across the board and the only area of lending that remains significantly affected is for self-employed borrowers due to the way accounts were affected and the grants that were potentially taken during the pandemic. There is a great deal more evidence required and more questions surrounding these types of borrowers, despite the fact criteria has relaxed and we suspect underwriting in this space will remain more thorough and different to before Covid for some time yet…