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Private Finance's Mortgage Memo - 30th 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.

  • Low housing stock leading to increased demand for rental properties
  • Increase in mortgage enquiries that include debt consolidation from affluent borrowers
  • Best mortgage rates available only for purchases

Low housing stock leading to increased demand for rental properties

We have seen a lot of clients who have sold their main residences and secured mortgage offers, but then due to either chain collapse or the inability to find a suitable property due to reduced stock have moved from being short-term to medium-term renters, consequently a number of those in a position to buy are taking up stock in the rental market. With housing stock at record lows and demand remaining high, this could be driving an increase in tenant demand in the rental market with rental demand widely reported as being at an all-time high.

  • The increase in house prices across the UK has been great news for existing landlords, giving them capital growth alongside their rental income, however it has not been so good for new entrants to the market as with increasing prices comes reduced yields. Consequently, we have seen an increased number of our existing landlord clients and new enquiries move into holiday lets, commercial properties and larger projects like developments and self-build. This combination of factors could be placing further pressure on rental stock.
  • With the high levels of demand in the market, we have heard from several lenders that they are wanting to increase their share of the buy-to-let market in 2022 - we have already seen HSBC launch their buy-to-let offering through intermediaries and Accord remove minimum income requirements last week and so it bodes the question as to what other innovation will we see in the New Year?

Increase in mortgage enquiries that include debt consolidation from affluent borrowers

We have noted an increase in enquiries that include debt consolidation, both first and second charges, and this is from borrowers looking at larger mortgage amounts. This for the most part is on account of borrowers taking out debt at the height of the Covid pandemic to increase space in their current homes through extensions or new units in their gardens as home offices or undertaking renovations in general for more space while cooped up at home.

  • Borrowers are not usually aware of the complexities that this consolidation alongside a mortgage or remortgage entails, and it can be complex for a number of reasons. Many lenders cap the amount you can borrow where there is an element of debt consolidation, many won’t let you do interest only if you are consolidating debt and it is complex from an affordability point of view, as many lenders don't discount it from your affordability calculations even if it is being repaid
  • With household debt having risen in the 12 months to September 2021 according to The Money Charity this presents a difficult prospect for many especially with interest rate rises on the horizon.

Best mortgage rates available only for purchases

The best available mortgage rates in the market for a 2-, 3- and 5-year fixed, and 2-year tracer are now only available for purchases, with remortgage rates being up to 10 bps more expensive for the best available rate – as illustrated below.

 

Type PurchaseRemortgage
2-Year Fixed 1.09 1.14
2-Year Tracker 0.79 0.82
3-Year Fixed 1.24 1.34
5-Year Fixed 1.28 1.34
  • This marks a shift from the midst of the pandemic when remortgage rates were lower and illustrates a shift in the demand in the market with a significant decrease in purchase transactions since the end of September. Lenders will consequently be looking to take advantage of the demand for remortgages while the interest rate environment remains low with increased margins, all the while competing to retain a market share in the increasingly competitive purchase space. 

Private Finance's Mortgage Memo - 30th November 2021

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© Private Finance Limited, 2022. Private Finance provides independent mortgage advice and arranges individual mortgage solutions for clients. Private Finance is a trading style of Private Finance Ltd, 29 Lincolns Inn Fields, London, WC2A 3EG, registered in England no. 3855776 and its Appointed Representatives. Private Finance Limited is authorised and regulated by the Financial Conduct Authority (FCA registration number 310566).

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