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Private Finance's Mortgage Memo - 30th March 2022

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.

  • Best available 2-, 3- and 5-year fixed now all green products
  • Rising asking prices and bidding wars leading to down valuations
  • Rise in commercial mortgage enquiries

Best available 2-, 3- and 5-year fixed now all green products

The best available fixed rate mortgages are rising and have been since the end of 2021. The best available 2-year is currently 1.88% and the best 3- and 5-year on parity at 1.98%. What is interesting is not simply the rate itself, but the fact these are only available for green products which reward those with more energy efficient homes, with EPC ratings typically in the A-C range, with reduced rates.

  • Given the rising cost of energy in general, even before the 54% energy price cap rise due in April lenders have been increasingly tightening their affordability criteria to reflect the rising cost of living and these green products enable them to provide market-leading rates to consumers who will be less effected than those with far higher energy bills.
  • We believe the rising cost-of-living, in particular energy costs, will lead to homeowners and potential purchasers take a greater consideration of the energy efficiency of their homes or potential homes going forward. You can read more on this here (https://www.privatefinance.co.uk/news/blog/2022/03/22/could-the-cost-of-living-crisis-drive-buyers-and-borrowers-to-make-greener-choices).

Rising asking prices and bidding wars leading to down valuations

The property market is in a strange place at present, demand is incredibly strong despite the economic headwinds and supply remains very constricted with Rightmove reporting twice as many buyers as sellers. This mismatch is continuing to drive up prices, with the average price of property coming to the market breaking the £350k barrier for the first time ever with the annual rate of increase now at 10.4% (Rightmove House Price Index, March 2022). We are hearing from our clients and our agency contacts of consistent bidding wars for properties and sealed bids increasingly common both for residential and investment property. This poses the question, given the economic realities, as to whether the housing market has become overheated and whether a correction is imminent.

  • We are seeing examples from clients of down valuations, including an 8-bed HMO down valued from £345k to £250k and a residential property that went to sealed bids with the offer accepted at £861k down valued to £800k, both of which would have fallen through had the buyers not been able to draw on additional funds. We have also seen numerous other examples, for instance £500k to £470k for a property in Surrey and £380k to £340k for a property in Kent. It is interesting to note that all of these down valuations are happening outside of the Capital where price growth has been the most significant since the start of the pandemic.
  • Down valuations like this are uncommon, as in a buoyant market surveyors usually give the borrowers the benefit of the doubt, however they may be exercising caution at present fearing what could happen to the market in the coming months and years, especially as interest rates are increasing at a significant rate, in combination with rising inflation.
  • Buying at the top of the market could become problematic for some, especially those purchasing at a higher LTV with interests rates likely to rise further in the future.

Rise in commercial mortgage enquiries

We have seen a very large increase in commercial mortgage enquiries in the last month. This is due to the post-pandemic recovery, the lifting of all Covid restrictions and interlinked with this the return to city centres. But also due to the fact that some businesses that could pivot online thrived during the pandemic and thus have cash currently with which to invest in bricks and mortar premises or in property in general.

  • We also suspect due to the current economic climate; businesses will look to increase their control over cash flows and look to purchase their premises or invest in property to diversify their income streams. Moreover, with inflation at record levels both businesses and individuals are looking to move cash into assets and with Covid restrictions looking like they are (hopefully) consigned to history commercial property is looking like an attractive asset class again. 

Private Finance's Mortgage Memo - 30th March 2022

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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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