Yin and Yang of the mortgage market
Last week was a really interesting week, not just in the mortgage world but life in general, which really got me thinking about that classic Yin-Yang relationship of things, including the Yin and Yang of the mortgage market.
Schools are back
The big news of the week is that schools were back! Usual caveats around loving my daughter blah blah blah, but the simple fact it is great for her, and great for us! Then as you happily wave them off, pick up a latte and get an uninterrupted days work done, you immediately miss having their lovely little faces to look at…
Mortgage market pull-back but approval rates up
That same dynamic was in play professionally as well. Last week started with news that Barclays have made big reductions in the loans they offer new borrowers.
In some instances, borrowers will see a 19% reduction on what they can borrow. (So if you earned £100,000, they were offering a loan of £550k, from this week that is now down to £450k).
HSBC have pulled out of the 90% market, meaning you need a 15% deposit or more to get a new loan with them for the foreseeable future.
In fact this segment of the market has seen a huge pull back since lock-down.
MoneyFacts, a data firm, believe that there are now only 60 mortgage products for borrowers with a 10% deposit/equity, which is down from 770 in early March. That is before you even have to go through what is a very painful process at present which is more than doubling the time it takes to get a mortgage approved (but I do stress approval rates are up hugely!)
On the flip-side, both Halifax and Nationwide are showing their house price index value at the highest level EVER. Nationwide believes house prices went up 2% in August alone (Halifax say 1.6%). This is confirmed by many agents who are seeing the highest level of new sales being agreed since 2007.
Hence the Yin and Yang of the mortgage market.
Big push on mortgage activity
This illustrates very clearly there is a big push on mortgage activity, but lenders are having to pull back primarily due to lack of capacity (for more on this subject read here) and some concerns around the sustainability of house prices. (It is worth noting that while August’s figures are high, it only just reverses falls we have seen in proceeding months). Yin and Yang of the mortgage market!
Add in the usual concerns over COVID, Jobs, Brexit etc, you have a very mixed picture to work with.
There is no surprise that some lenders are pulling back and playing it safe. In your own business/life, if you had reduced capacity you would surely focus on less risky/more profitable activities too?
Mortgage Broker helps buyers and borrowers
Weirdly, it is times like this that I love being a broker, as we are one of the few people in the housing market that help buyers and borrowers.
We see things from your perspective and find the most suitable solution.
While there may be reduced availability of loans in some areas, they very much ARE available and for the vast majority of people it is business as usual. It is our unique perspective that allows us to balance off the demands of the property market with finding the most suitable lender.
Meaning, even in what is a very stressful and fluid situation, we do our damnedest to help people through it and take any stings out of the situation.
Money Markets all reversed the moves they had made the week prior!
As discussed above, it is a very mixed picture at present, but the one thing that does seem clear is rates are staying low for a very long time. Which in our view means long term fixed rates don’t hold much value.
Each persons situation is different, and that is the primary driver on the product you take, but purely from a numbers point of view, keeping things short term may well deliver the best value for you.
In the last week:
3 Month Sterling Libor = up by 0.008% at 0.072%
2 Year SWAP = down by 0.022% to 0.094%
5 Year SWAP = down by 0.060% to 0.187%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.09%
5 Year Fixed Rates from 1.29%
BTL Rates from 1.14%
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 September 2020
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