Private Finance's Mortgage Memo - 27th July 2022
Private Finance's Mortgage Memo
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.
- Political and economic uncertainty causing worry over house purchases
- Specialist mortgage brokers thrive in complex environment
- Kensington Flexi Fixed for Term products withdrawal and repricing
Political and economic uncertainty causing worry over house purchases
Due to political and economic uncertainty, we have noticed some potential house buyers expressing concern and become more hesitant, stalling property moves and delaying their decision to buy. As the Conservative party leadership debate continues, both candidates have expressed different views on monetary and fiscal policy that economic advisors have warned could lead to disparate economic outcomes in terms of interest rates and economic growth.
- The uncertainty on the direction of the economy following the outcome of the leadership race is enough to discourage many house buyers from making an expensive house purchase, especially when comments such as interest rates could reach 7% are made which we believe is merely fear mongering and would not be a feasible rate for many to pay, even if rates have been this high before.
- Some enquiries are choosing to stay in rental accommodation for the next few years until the economic and political situation demonstrates more certainty or until the property ‘bubble bursts’. Many enquiries have chosen to speak with one of our mortgage brokers to understand their options in this complicated market and then have chosen to wait until the situation improves. While others are opting to fix their mortgage for 5-years to lock in their mortgage rate and hope times are a bit easier at the end of this period.
Specialist mortgage brokers thrive in complex environment
Throughout the year, as the lending environment becomes tougher and lenders tighten their affordability calculators and lending criteria, we have had to help more clients after they had already been turned down by other mortgage brokers and we and other specialist brokers thrive in this complex lending environment.
- It is becoming an increasingly common situation where our brokers have had to approach a mortgage case in a different way after clients have been turned away by other mortgage brokers. Each week we ‘knowledge share’ amongst our team to find the lender that could help a client with a ‘tricky’ case. This knowledge transfer enhances our success rate to arrange clients’ mortgages and allows us to thrive in complex situations.
- We have had to turn to specialist lenders more than ever to rescue mortgage cases where high street lenders couldn’t assist. For example, a recent client of ours was looking to purchase their dream home. Initially, whilst they were told having their mortgage accepted would be fine by another mortgage broker, later the application was declined as they were told the property was not financeable due to the works that were required. We approached a specialist lender and had a refurbishment mortgage accepted that lends both for the purchase and towards the works they need to do achieving a higher level of lending they ideally wanted too.
Kensington Flexi Fixed for Term products withdrawal and repricing
Last week Kensington withdrew their recently popular highly flexible fixed for term product. As this is fixed for the term of the mortgage it allowed Kensington to stress test the mortgage at a lower rate (close to the pay rate on the mortgage) giving borrowers enhanced affordability calculations.
- We expect the withdrawal was largely due to demand. The product was priced very competitively for the current market especially as they hadn’t repriced it while rates were increasing. It was even cheaper than many 5-year fixed rates in a lot of circumstances. The product also had no ERCs if the property was sold when leaving the product early.
- Previously for FTB it went up to 6x incomes which is significantly more than a lot of lenders will go to, especially at the higher loan-to-values and when flexing affordability, if people have some credit cards or loans in the background.
- Kensington are rereleasing their new rates on Thursday, and it will be interesting to see how the product redevelops and see where they reprice it to as it was a good product that suited many clients.
- We expected more lenders to enter this market when Kensington first launched these products as they were relatively unique with their ultra long-term fixed rates, however this did not happen, or at least the lenders that did enter did not come close in terms of competitiveness.
If you have any questions on any of these stories, or would like further information, please do not hesitate to get in touch.