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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.
The growth in interest only mortgages
We have been seeing a significant rise in interest and demand for interest only mortgage products in 2021. While these types of products are usually only available to wealthier borrowers, with high levels of equity or cash/investments in the background, they make purchases incredibly affordable. Many prefer the certainty of a repayment mortgages but the majority of interest only mortgages still enable borrowers to repay the capital in up to 10% chunks per annum without fee. Interest only is particularly useful for those who have relatively smaller basic incomes, but large bonus/commission packages or seasonal / variable incomes. This growth is likely due to the fact it is a useful form of borrowing for those who want to purchase a second home or holiday home, as it reduces their expenses considerably – for instance you could pay £1,000 a month borrowing £750,000 on a £1.5m country house given the low rates of interest available, in comparison to say £3,600 per month on a repayment basis over a 20-year term.
Borrowers extending themselves to secure forever homes
We are seeing an increasing number of buyers extend themselves in order to secure bigger properties, that they would otherwise have waited a few more years before purchasing. Effectively, buyers are leapfrogging steps in the usual climb up the housing ladder and can this, partly due to the fact an increasing number of people have been freed from the geographic shackles of the commute (see below) and due to the low interest rate environment. For instance, clients who in the past would have been more conservative, regardless of the fact more was affordable are significantly increasing their borrowing to secure a long-term home that ticks all their boxes; one recent client was looking around the £750k mark initially but came back to us looking at £1.5m after failing to find anything they deemed suitable. Another who is living in a £400k one-bed flat is skipping the usual second step to a £700/800k property and looking to buy a large house at around the £1.2m mark.
Buyers and borrowers moving even further afield
We are seeing an increasing number of clients moving even further afield than was previously the usual for those looking to upsize and leave city behind. We have seen this trend extend to first-time buyers too, as well as second steppers as outlined above. Pre-Covid, the norm would be for borrowers who were located for work in London and the South-East to make the move to the Home Counties or those areas in commutable distant from London in the search for more space, however with commuting dramatically reduced, we are helping an increasing number buy in places like rural Devon, Norfolk and Cumbria