Private Finance's Mortgage Memo - 20th April 2022
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.
- Student Loan interest rates shouldn’t impact your mortgage
- Clients more anxious about property buying process
- Specialist lenders more competitive than ever
Student Loan interest rates shouldn’t impact your mortgage
There has been a lot in the press last week on the latest increases to interest rate payments on student loans due to the rise in RPI in March. The IFS (Institute for Fiscal Studies) estimate that rates could rise up to 12% for some. Many people with student debts are worried about how this could impact on them getting a mortgage and it’s a question we often get from first-time buyers. While the recent rate rise will lead to more debt being built up in the long-term, the amount paid each month will remain the same as it is linked to income.
- Lenders do take the overall debt into account, however they are concerned with the monthly payment itself, and as the committed expenditure for an applicant isn’t changing, this rate rise should not impact mortgage affordability.
Clients more anxious about property buying process
Lately we have found many of our clients are more worried than usual or anxious about the property buying process, particularly fearful that the sale will fall through on a property they really want.
- Some people may have been searching for a house for more than a year now and may have struggled to find adequate property or have missed out on the one they really want due to the competitive nature of the market from the supply-demand imbalance. Our brokers have seen many cases of late where a property sale has fallen through and the buying process is far more fraught in general, with properties often going to sealed bids, the rise of cash buyers, down valuations and gazumping amongst other things.
- Another reason may be due to lenders changing their affordability assessments amid high inflation and likewise, the increasing base rate environment where lenders have been quick to increase their rates, on some occasions overnight. Clients are eager to have their mortgage offers as soon as possible to secure rates, however at the same time some lenders continue to increase their processing times, for example, one lender is currently taking up to 18 days to look at a case.
Specialist lenders more competitive than ever
Traditionally specialist lenders often charge a large premium in comparison to mainstream lenders. However, over the last 6 months, while mainstream lenders have been rapidly increasing their rates as a result of increasing swap rates and the base rate rises, specialist lenders have remained relatively stable or increased rates slowly and comparatively less compared to mainstream lenders.
- Where previously you may have been paying 1% with a mainstream lender and 2.2% with a specialist lender, it is more likely now the rate difference will be 2.2% with a mainstream or 2.5% with specialist. This makes those with more specialist circumstances comparatively better off.
- Often clients nowadays will have more specialist circumstances especially when considering Covid and disruptions to employment and impact on the self-employed sector. For example, some clients may require a specialist lender who can account for reduced income during lockdown, or a grant taken out in this period.