Private Finance's Mortgage Memo - 2nd November 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.
- Mortgage rates rise, but some good news for low deposit borrowers
- BTL and residential fixed rates on parity
Mortgage rates rise, but some good news for low deposit borrowers
We have seen best available rates rises across the board in the main residential fixed rate mortgage types (2, 3 and 5-year) and a number of mainstream lenders have also increased their rates across their product range. The best available 2-year fixed rate has gone up 0.15% in the few days for instance. However, while rates at the lowest LTV’s are rising, we are seeing convergence in lenders product’s offering and rates at higher LTV’s (i.e., 80% and above) have gone down in some instances.
- Rates are rising slowly at present in anticipation of a base rate rise and we suspect these rate increases will accelerate in the New Year, however, regardless of when the base rate rise comes into play some mortgage lenders are already factoring this into their pricing, meaning the lowest rates we saw recently available in the market in the fixed rate product category have now ceased to exist.
- The best rates on offer are not necessarily representative of what the majority of borrowers are able to access and the interest rate environment in general remains incredibly low and thus the cost of borrowing remains cheap. It is however likely that we will move into rising rate environment for the foreseeable future, meaning now is the time to for borrowers to consider remortgaging and we suspect we will see borrowers lean towards longer fixed terms with an increased demand for 5-year products.
- Despite the fact that rates are falling at higher LTVs with rate rises predicted, house price rises have made it increasingly difficult for first-time buyers and second steppers. Interest rate rises could restrict affordability even further and in time if the rises are significant this could have an impact on prices impacting those already on the ladder at high LTVs.
BTL and residential fixed rates on parity
We have recently seen an increase of 0.15% in the best available 2-year fixed rate residential product, seeing it go to parity with the best 2-year fixed investment product for the first time with both products now at 0.99%.
- BTL mortgage rates used to be roughly double what one would pay for residential rates. That was until lenders lowered their rates to attract new business from landlords whose potential profits were becoming squeezed due to increasing costs; including the 5-year tapering out of the tax relief further compounded by the 3% additional SDLT they faced. Despite the fact we have seen BTL mortgage rates in consistent decline, seeing them on parity with residential rates is surprising.
- BTL lenders tend to be more conservative and so were slower to reduce rates than lenders in the residential sector and as such we suspect that these rates will rise again soon and possibly at a faster rate, especially with the potential rate rise coming as early as this Thursday.
- Some BTL products have significant fees attached and in certain instances it may be cheaper to consider taking a product with a higher rate for a lesser fee as this may in fact work out cheaper.