FINANCE
Mortgage yo-yo Rates are up… rates are down… rates are up. Kay Hill looks at the constantly changing mortgage market and notes some new initiatives on the scene
than perfect credit record or are looking at a non-standard property.
A few weeks ago, it looked like it was time for a cheering review of the way mortgage rates were reducing and borrowing was becoming more accessible. But the combination of international events and home politics suddenly meant that the future became impossible to predict. Just before the Budget, David Hollingworth, associate director at L&C Mortgages, said. “The mortgage market has seen rates falling in recent months but that may be coming to an abrupt halt. Fixed rate pricing depends on what the market anticipates may happen to interest rates; and uncertainty over the Budget, mixed messages from the Bank of England and global unrest is pushing costs back up for lenders. Borrowers may have been lulled into a false sense of security with round after round of rate improvements, but this is a reminder that things can change.” At the same time, Moneyfacts found that average mortgage rates for the most popular fixed rate terms had increased, after a series of drops, with the average two-year deal up from 5.36% to 5.37% and five-year deals up from 5.05% to 5.06%. But behind those averages is a stream of lenders changing their products – some, such as Coventry Building Society, Santander and TSB putting rates up, while others, such as Buckinghamshire Building Society and Yorkshire Building Society, reducing them. INTEREST RATES Products aimed at first time buyers seem most resilient – reflecting lenders’ enthusiasm for new business. Buckinghamshire Building Society’s Prime 95, offering 95% LTV fixed over five years, has reduced from 5.59% to 5.29% while Yorkshire Building Society’s £5K Deposit Mortgage, a 95% loan for first time buyers, has also gone down from 6.24% to 5.79%. Ben Merritt, director of mortgages at Yorkshire Building Society, said, “Our research suggests products of this kind are vital to renew the faith of would- be first time buyers by showing them that homeownership need not be out of reach.” With mortgage rates so volatile, shopping around is vital. MoneySavingExpert offers a comparison site that lists mortgages available direct and through brokers, enabling you to get a good idea of what is on offer, while an independent mortgage broker will also have access to detailed information about each lender’s criteria. This can be particularly important if you are self-employed, have a less
LARGER MULTIPLES
A number of lenders have increased the amount they will loan, with some now offering to lend up to six times household income. Large multiples were commonplace before the 2008 credit crunch, but since then, three or four times household income has been as far as most lenders were willing to go. In recent weeks, however, the landscape has changed, with Britain’s largest building society, Nationwide, now offering loans of six times salary on up to a 95% loan-to-value (LTV) as part of its Helping Hand range of products. The loans are fixed for five or 10 years, with 95% LTV rates of 5.04% fixed for five years and 5.9% for 10 years with no fee, or 4.99% for five years and 5.79% for 10 years with a £999 fee.You must be a first time buyer, not self-employed, with a minimum income of £30,000 (sole applicant) or £50,000 household income. It cannot be used with Deposit Unlock, First Homes or shared ownership, and there’s a maximum LTV of 75% on new build flats and 90% on new build houses. An early repayment charge applies throughout the mortgage term. Nationwide isn’t the only company lending larger multiples – Virgin Money for Intermediaries offers 5.5 times income over £75,000 on up to 85% LTV, and both Lloyds and Halifax offer First-Time Buyer Boost, lending 5.5 times income up to a 90% LTV with a minimum household income of £50,000. West Brom for Intermediaries will loan up to 5.75 times income for applicants earning over £75,000, while Kensington Mortgages and Teachers Building Society both offer up to six times income for higher earners. April Mortgages and Perenna Mortgages, both relatively new
EXPERT COMMENT
“As rates have fallen from their recent peaks, potential buyers are nding themselves with more nancing options helping drive up demand. Currently, some lenders offer deals around the 4% mark, a stark contrast to the 5% or higher rates seen in the immediate aftermath of the 2022 mini-budget and beyond. This reduction in rates has enabled buyers to secure larger mortgages, making previously unaffordable properties more attainable. However, while rates are improving, they remain signi cantly elevated compared to pre-pandemic levels, making the cost of borrowing still out of reach for many, especially for rst time buyers. With the interest rate road map still unclear, many are facing tough decisions about whether to x their mortgage now or opt for a tracker. Fixed rates, while providing stability, are much higher than they were before 2020, making tracker mortgages more appealing to those willing to tolerate some uctuation and potentially a higher price now, but with the chance of xing when rates have dropped more. This has created a competitive market for lenders. The broader expectation is that the Bank of England may continue to adjust rates downwards – even so, any signi cant scal changes could in uence mortgage affordability, leaving buyers cautious.”
to the UK, loan up to six times income. At April, a 15-year fix on up to 85% LTV is 5.95%, while Perenna offers a new build
95% LTV mortgage fixed for
Karen Noye, Mortgage expert, Quilter
10 years at 6.26%. Most exclude the self-employed.
86 First Time Buyer December 2024/January 2025
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