A mortgage war has broken out across the UK, as rates reach a record low.
Metaphorical shots were first fired at the end of April, when Nationwide Building Society announced it was cutting rates on selected 2 and 5 year fixed and 2 year tracker rate mortgage products by up to 0.10 per cent. Now, HSBC has gone one step further with the lowest five-year fixed rate currently on the marke, which is available from 1.69 per cent to 60 per cent LTV with a £999 fee, a cut of 0.10 per cent.
The steady decline in UK mortgage rates over the last nine years has seen the average new lending rate fall from a peak of more than 6 per cent in 2008 to a new low of less than 2.2 per cent in Q4 last year, according to research by Natwest.
As a result, and in spite of steadily rising house prices, mortgage interest costs as a percentage of income have been falling for the majority of homebuyers. Data from the Council of Mortgage Lenders show that the median house buyer in the final quarter of 2016 had to allocate less than 8 per cent of their income to mortgage interest, compared to a peak of 18 per cent in 2008, and a long-run average of 15 per cent.
“With quoted new lending rates half a percent lower than the average rate on outstanding mortgages, it is likely that the interest cost burden will decline even further in the short-term,” says Natwest.
“This is yet another signal that the mortgage market is more competitive than ever and lenders are scrapping it out to attract business, whether it’s from those buying their first home, moving house or looking to switch to a better deal,” comments David Hollingworth, mortgage expert at L&C Mortgages. “More lenders fighting for business means that they need to stand out from the crowd and truly differentiate themselves. This, coupled with some easing in cost of funds, is forcing lenders to offer rates that demand attention. As a result, lenders are squeezing whatever they can out of their deals and offering more and more eye catching rates.”
“Our research found that more than a third of borrowers are languishing on standard variable rates despite the fact that ultra low mortgage rates are widely available,” Hollingworth adds. “It’s important that borrowers consider the best overall value for them, particularly given the fact that the very lowest rates can carry steep fees. However most lenders will offer a range of rate and fee combinations so there should be something for everyone. In recent years, mortgage borrowers have been the big winners, as the Bank of England Base Rate not only remained at rock bottom but also fell further following the vote to leave the EU.”
UK mortgage accessibility hits three-year high
3rd April 2017
The accessibility of mortgages in the UK has hit a three-year high, reveal new figures.
The latest report from the Intermediary Mortgage Lenders Association (IMLA) shows that brokers are encountering fewer difficulties when sourcing mortgages for clients than at any point since the introduction of the Mortgage Market Review in 2014.
The MMR was designed to crack down on any unreliable lending in the UK, securing and stabilising the market by ensuring that buyers could afford their mortgage repayments. While that was expected to make it harder for buyers to get on the housing ladder, though, the IMLA’s findings highlight how favourable conditions have become, thanks to low mortgage rates.
3 in 10 mortgage brokers reported that they had no problem sourcing a mortgage for any client in the second half of 2016, up from 26 per cent in the first half of 2016 and double the rate recorded a year earlier. Just 16 per cent said they were unable to source a mortgage for first-time buyers, down from 29 per cent in the first half of 2016.
Executive Director of the IMLA Peter Williams comments: “It is hugely encouraging to see a greater number of brokers are reporting that they are successfully arranging mortgages for a wide variety of clients. Over the past few years, regulations like the MMR have raised the bar in terms of borrowers’ requirements, which some predicted would leave many borrowers locked out of the market. This new regulatory regime has made the intermediary channel more important than ever, and brokers are clearly doing a great job of helping people get a foot on the housing ladder.
“House prices have been growing faster than incomes over the past few years, which has challenged affordability. This issue has been particularly acute among first time buyers, which means the fact that just 16 per cent of brokers reported they were unable to source a mortgage for someone in this group over the six months is very positive news. Low mortgage rates have continued to support borrowers’ affordability by reducing monthly payments.”