Banks and building societies will be hoping for a busy start to 2025 by offering competitively priced rates and more generous loan sizes. However, as the pound's value falls and government borrowing costs rise following Rachel Reeves's budget, fixed-rate mortgage price hikes may not be far away.
HSBC has announced two separate mortgage rate improvements this year, while Halifax lowered some rates by up to 0.35%. Most mortgage lenders still offer a range of competitively priced fixed rates, including HSBC's 4.20% two-year fix and its 4.06% five-year fix, but these rates may not be available for long. I
n its mortgage and housing forecast 2025, UK Finance, the trade body representing 300 firms across the financial services industry, expects mortgage lending to home buyers to increase by 10% from last year and reach £148 billion by the end of this year—also buy-to-let mortgage lending to reduce by 7% to £9 billion.
UK Finance expects a 30% rise in borrowers remortgaging to other lenders rather than sticking with their existing provider when their mortgage deal is up for renewal. This rise may be due to borrowers looking for more competitively priced rates, no early repayment charge options, the need to fund home improvements or raise funds for debt consolidation.
Mortgage affordability
Mortgage lenders are undoubtedly offering more generous income multiples and larger loan sizes, partly because the Bank of England base rate changes have enabled them to reduce their affordability stress tests.
More banks and building societies offer five- or 5.5-times salary mortgages, while Nationwide for Intermediaries offers up to six-times salary mortgages to first-time buyers. Nationwide says its income stretch mortgage potentially enable buyers to borrow 33% more than with a standard mortgage.
What mortgage criteria has changed so far this year?
TSB for Intermediaries has announced it offers a new mortgage option to help tenants buy rented homes from their landlords. The new “5&5 concessionary mortgage” is available when landlords offer tenants a 5% discount on the purchase price. The buyer also needs to contribute at least 5% as a deposit. The mortgage will operate in addition to TSB’s 10% scheme. Under this option, landlords sell their property to tenants at a 10% discount or more on its market value, meaning the buyer doesn’t need a deposit. According to the government's latest English private landlord survey, 31% of landlords plan to sell properties they rent out over the next two years, often because of increased mortgage costs, higher taxes and additional regulation.
Vida Homeloans has launched a range of 97% loan-to-value mortgages designed to help borrowers get on the property ladder with a 3% deposit. With rates starting from 7.4%, the mortgage is not cheap, but it will help some borrowers get on the property ladder.
The specialist mortgage bank's new ‘3 & Easy’ products have been designed to help long-term renters and first-time buyers get a foot on the property ladder or begin to move up the chain. It is advisable to look at other options before locking into a high rate like this; for example, Skipton has a no-deposit renter mortgage, and Accord has a 1% deposit mortgage. The rates are cheaper.
2025, the year of the Energy Performance Certificate
More mortgage lenders are likely to start offering their cheapest rates and potentially more generous loan sizes when borrowers buy properties with A or B rated properties. If you are purchasing a property with a low EPC rating, it is worth noting you may well end up paying slightly higher rates if you don’t carry out home improvements like solar panels or energy storage solutions. Here is a recent guest blog we had which spells out how homeowners can improve their homes energy efficiency rating and potentially lower their bills.
Contact Trinity Financial
At Trinty Financial, we help all types of borrowers, from first-time and next-time buyers to business owners and international clients seeking £1 million+ mortgages. Book a mortgage consultation by calling 020 7267 9399 or emailing [email protected]
