The end of lockdown and the mortgage market
That’s it, we are here, the end of lockdown? The ability to be waxed, dyed and trimmed as needed!? Draft beer back on the menu? Let’s really hope it is that way for good now and the Great British weather plays ball while most of this will all be outdoors for a while. We can only hope 🤞 (but as I type this on Sunday afternoon it has just started snowing heavily… Although in fairness, it would take more than that to get me out of a pub garden after months of lockdown!)
It’s been exceptionally busy since we got back from Easter, and a lot cover as always, so lets dive into the main topics of the week;
The End of Lockdown Payback
As we move into the period where we say things like “this time last year” and it has seismic meaning, none more so will be true of things like Bounce Back and CBILS loans which started then. As there were 12 months from repayments starting, we are now into the period where these will need to be repaid. How much of an impact will that have on businesses?
That is a huge unknown. There will be an immense range of outcomes in the last 12 months, those that took the money and kept it on their balance sheet “just in case”, who no doubt will start to repay the monies now. The majority I suspect who needed them to keep the wheels turning during a very difficult period, and at the other end of the spectrum, those who took them on, things have not improved, and this could be the final burden to push the business over the edge.
All indications are at the end of lockdown that the UK has bounced back well, and business failures should be far less than initially anticipated, but equally we are now in the zone where we will start to see that happening.
Mortgage lenders are very aware of this, so if you do own a business and you took some of the schemes mentioned above, that isn’t an issue as long as there is enough profit generated to cover the new loan repayments, but it may reduce the level of borrowing you can achieve.
We are yet to see how all lenders are dealing with this and it will be a real snapshot in time thing, as in 12 months +, the payments will be factored into the companies P&L and therefore loans underwritten as they are now, but for the next 12-18 months, expect lenders to be very intrusive when assessing loans when you are self employed, and if you are employed by the firm, lenders will be checking the viability of the business for any warning signs which may put them off lending.
As I mentioned above, I do feel issues will be quite limited, but equally, strap yourself in for a bumpy ride the next few months while a new standardised way of working starts to form as mortgage lenders have never had to deal with this type of thing on this scale before. They know after all as they have been the ones lending the money!
House Prices Hit Record High
Data from Halifax last week saw house prices rise 1.1% in March, which was 6.5% higher than March 2020. Taking the national average to £254,606, a record high.
Russell Galley, managing director of Halifax, said:
“The continuation of government support measures has been key in boosting confidence in the housing market. The extended stamp duty holiday has put another spring in the step of home movers, whilst for those saving hard to buy their first home, the new mortgage guarantee scheme provides an alternative route onto the property ladder.”
“Overall we expect elevated levels of activity to be maintained in the coming months, with consumer confidence spurred on by the successful vaccine rollout, and buyer demand still fuelled by a desire for larger properties and more outdoor space, as work-life priorities have shifted during the pandemic. A shortage of homes for sale will also support prices in the short term, as lower availability always favours sellers.”
Our Top Lenders Q1 ’20 vs Q1 ’21
This may or may not be of interest, but we look quarterly at the lenders we use and try to spot any trends or what can be learned from this. Below are our top 10 lenders in that period. We saw a 16% rise in lenders used, which again shows the market is opening up again as more lenders come back into the market.
Barclays are starting to lose their very dominant top position, but that is to be expected as leading up to lockdown there was added reason to stay with the lender you were with around fears of being rejected or if there were down valuations which may affect the lending.
A year on, most lenders are returning to ‘normal’ so it is no surprise there is more of a spread of lenders used.
Interesting that the big movers came from Clydesdale and Coutts, which reflects the larger and more complex mortgages we are doing now compared to a year ago.
HSBC were really getting a lot of traction with us, and were exceptional during lockdown #1, so a shame to see them pegged back, but in our world, it is all about finding the cheapest or most suitable lender so no room for sentiment!
Market rates pretty flat this week, which is no surprise as we have seen a lot of gains over the last few weeks. It is quite likely they will level off for a while now unless anything changes in the economic outlook.
So our default position stands at the end of lockdown, unless you have any specific needs, we would most likely recommend a longer term fixed rate if you have a 25% + deposit, but keep it short term or flexible if less than that figure. We are yet to see the ‘big boys’ come into the 95% Market, so once we see some movement there, we also expect the cost of mortgages at this level to start to decrease, but that may take some time yet.
In the last week:
3 Month Sterling Libor = down by 0.002% at 0.085%
2 Year SWAP = up by 0.001% at 0.284%
5 Year SWAP = down by 0.010% to 0.673%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.05%
5 Year Fixed Rates from 1.24%
BTL Rates from 1.19%
The actual rate you will be offered 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 April 2021
With the end of lockdown should you wish to speak to one of the team about your mortgage, we would be delighted to help.
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Your property may be repossessed if you do not keep up repayments on your mortgage.
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Rose Capital Partners Limited is an appointed representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Limited which is authorised and regulated by the Financial Conduct Authority.