Mortgage Lending Above Pre-Covid Levels
For anyone who sat in a queue for fuel this week, you probably had time to reflect that this country really isn’t functioning at an optimal level at present, to say the least…
Luckily for me, I am one of those smug electric car drivers, but it has been quite surreal seeing huge lines outside every petrol station I pass and really got me thinking about the state of affairs in this country. We are now seeing tax rises to pay off the eye-watering debts we built up during the pandemic, to fund services we can’t access anyway, as many staff in the public sector are close to breaking point over what they have had to deal with over the last 18 months.
I’m not one to be a reactionary, as most problems we are seeing are extremely complex and there are very few simple answers. But I do try to reflect back on questions like – what can I do to improve my situation? and – Is any of this in my control to resolve? But even with such Stoic thought, I have come up empty-handed of late, so my sole focus is around what I can do in a work and family context, as so much is outside of my control that it can get very stressful and anxiety-inducing to worry about it. So to that end, the below stories caught my eye last week to try and make sense of what is happening in my world!
Mortgage Lending Above Pre-Covid Levels
Last week the Bank of England published their ‘Money and Credit’ statistics for August, which showed Gross mortgage lending bounced back to £21.5 billion, which was up from £16.6 billion in July.
Lending as a whole has remained above pre-pandemic levels since the end of the first stamp duty holiday in June and is projected to stay that way for at least until the end of the year.
On closer inspection, policymakers within the Bank of England have left the door open for interest rate rises as soon as November. Lizzy Burden picked up on this theme in detail in her article on Bloomberg last week. As the Bank of England’s rate-setting committee doesn’t meet until 4th November, the key factor is going to be inflation. As touched on in the intro above, things like fuel and food inflation do not look to be transitory things, as weaknesses in the UK’s supply chain post-Brexit have been brutally exposed.
So the classic post-Covid dynamic is in sharp focus – do we raise interest rates to try and quell inflation which is set to go well over 4% by year-end (which is double the 2% target the BoE set), which in any normal situation they would do BUT will that take the heat out of an increasingly shaky looking recovery?
Money markets certainly seem to be hedging against rate rises in the near future, more on that below.
Mortgage Rates Get Lower Still…
Research from Money Super Market has shown a 5 fold increase in sub 1% rates from June to today. These will be if you are living in the property and typically have a 40% deposit/equity.
Platform, the broker lender of the Co-Op Bank, has also come in with a market-leading Buy To Let rate at 1%, again, another record low, so other lenders may have to push down margins in this area of the market if they want to attract the best borrowers.
However, as per the points above and below, how much longer can this last?! It won’t be for much longer, so it is a case of when, not if, mortgage rates start to creep up.
Money markets moved up significantly last week and carried on their upward curve throughout September. As touched on above, we seem to be gearing up for interest rate rises so how much longer can lenders keep the best mortgage rates as low as they currently are?
Therefore, our default position stands, unless you have any specific needs, we would most likely recommend a longer-term fixed rate if you have a 25% + deposit/equity, but keep it short term or flexible if less than that figure.
In the last week:
3 Month Sterling = down by 0.005 at 0.081%
2 Year SWAP = up by 0.121% at 0.710%
5 Year SWAP = up by 0.134% to 0.983%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 0.85%
2 Year Fixed Rates from 0.79%
5 Year Fixed Rates from 0.91%
BTL Rates from 1.00%
The actual rate you will be offered on your mortgage lending will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec October 2021
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