Mortgage Update

At Prospect, we’re committed to finding you the best mortgage rates, which could save you thousands of pounds over the term of your mortgage. We work in association with the Mortgage Advice Bureau (MAB) to provide impartial advice to our clients, who are applying for mortgages.

Prospect’s team of Independent Financial Advisors will ensure you are completely up-to-date with current market trends and make you aware of the best mortgage rates. They can also assist you with any mortgage or property finance questions you may have.

So, what market trends have we seen lately and what are the best mortgage rates available? 

Arrange a free meeting with one of our Financial Advisors today by calling 0118 907 9839.

 

Transactional Activity

Activity in February in particular has been driven largely by the impending increases to Stamp Duty Land Tax (SDLT) due to come into effect in April 2016. MAB witnessed its highest volume of new mortgage transactions to date with almost £1.2bn of new applications bring written during February. During March, momentum has eased a little as we approach the introduction of the new SDLT regime for second home buyers and buy-to-let investors. Last time in my commentary I discussed how we had seen a material increase in buy-to-let activity in the weeks following the Chancellor’s Autumn Statement, with the proportion of buy-to-let moving from circa 16% of transactional activity to 22% of business. Not surprisingly this has eased back in the last few weeks towards the former average of 16–17% and we envisage activity at or around this level in the short to medium term.

Lender Usage

Natwest have continued their strong start to 2016 as our most frequently used lender, accounting for 16% of all applications in the first two months of trading in 2016 with Nationwide in 2nd place (13.8%), Halifax 3rd (12.1%) and Santander 4th (10.4%). The balance of our top ten most frequently used lenders witnesses TMW in 5th place (their highest ever usage with MAB at 5.7% - driven by the surge in landlord cases) ahead of Woolwich with 4.3%, BM Solutions 4.2%, Coventry/Godiva and Virgin Money both with 4.1% and TSB with 3.6%.

Interest Rates

Moneyfacts report that interest rates were mixed during February, and at the beginning of March – two year average fixed rates rose in March over Feb albeit by 2bps. Three and five year fixed rates both fell by 1bps, and 2 year trackers actually increased by 5bps. Average rates amongst buy-to-let products have also been falling steadily almost in line with residential with two, three and five year average fixed rates having fallen by approximately 75bps over two years and by 10bps-25bps in the last 12 months; further fuelling buy-to-let; particularly the remortgage buy-to-let arena as costs have fallen for landlords combined with generally rising rents. 

Mortgage Products

Once again mortgage product numbers increased in February to more than 17,500, of which, 12,500 were available via the broker channel – the highest numbers since March 2008.

Market Conditions

We commented earlier about the increasing level of activity within the buy-to-let market, part of which will be constrained by a combination of tax change introductions - but we have also now seen proposals presented by the Prudential Regulation Authority around raising the underwriting assessment standards of buy-to-let mortgage applications applied by lenders.

These proposals will mean more consistent and tougher hurdles having to be applied by lenders in assessing applications within this sector. Should these proposals proceed to implementation (which is likely), activity may be further curbed within the buy-to-let sector as more applications would fail the increased scrutiny demanded of lenders by the regulator. This policy is set against a back drop of the treasury having concerns about the impact that the buy-to-let market could potentially have on financial stability of the wider UK economy – so these proposals are not unexpected and are, it seems, part of a concerted effort by both government and regulator to curb the growth in the sector.

We also now know that the referendum vote to remain in, or opt out of the European Union is set for the 23rd June 2016 – the day of the MAB Conference. At this stage, it is too early to determine if borrowers are mindful to delay in any way any plans they may have to buy, move home or remortgage as a result of that event? Certainly, the last three months activity would suggest otherwise, but a significant proportion of recent activity has been fuelled by the financial gain to be enjoyed by borrowers who are buying a second home or buy-to-let property - avoiding additional SDLT that will become payable from next month.  

 

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