Mortgage lenders and estate agents are reporting improved transaction levels as the cheaper rates and stabilising house prices boost market confidence. Aaron Strutt of Trinity Financial discusses the changes.
Barclays offers some of the most competitively priced two-year fixes, starting from 4.54%, and HSBC for Intermediaries has a five-year fix at 4.24%. These rates have arrangement fees of up to £999, and they are available to borrowers purchasing properties. Applicants must have a 40% deposit to qualify. It is worth noting rates through these banks are not much more expensive for buyers with 25% deposits.
Some lenders raising rates as sub-4% deals are pulled
Trinity Financial's brokers have been busy submitting applications for their clients to ensure they secure the leading mortgages. This is because many of the banks, like Santander, NatWest and Barclays, have been pushing up their rates as the sub-4% deals disappear.
Halifax, the UK's largest lender, seems to have been the busiest bank recently when it comes to raising rates, with several price increases over the last few weeks. However, some lenders, including Coventry Building Society and GenH, have lowered their rates as they buck the current trend.
Increasing competition and more mortgages to choose from
The latest figures from Moneyfacts show how the mortgage market has improved recently. The data provider says the number of mortgages available is at its highest level since 2008. There are just over 6,000 mortgage options for borrowers to choose from while the availability of deals for those with a 10% deposit has also increased to its highest point in four years.
The high level of mortgage availability means there are products available for all types of buyers, including first-time buyers, bankers, those looking for more generous income multiples, and the self-employed. Lenders are also keen to issue mortgages against different property types, such as larger homes, houses with annexes or land, country estates, new build and listed buildings.
While more mortgages are available, the average shelf-life of a product has reduced to 15 days as the lenders continue to change their mortgages without giving much notice.
Mortgage lenders want to lend more money. We know this from the number of banks and building society business development managers who contact us to discuss their products and services and their improving acceptance criteria.
One small building society recently set up a regular online meeting where brokers can discuss niche applications with their heads of lending and finance directors. They are keen to attract deals that "make financial sense" even when there are few alternative options.
Virgin Money recently increased the amount it will lend to higher earners, and a more stable interest rate environment has helped calm fears about mortgage affordability, according to the latest property tracker data from the Building Societies Association.
Even the buy-to-let sector seems to have picked up with Nigel Terrington the boss of specialist buy-to-let lender Paragon, recently telling The Times, that he expected lending to landlords and builders to increase this year. This is likely to be linked with market insight from Monta Capital, the property investment manager, showing that up to 85% of tenants in the UK are renting out of necessity as they are unable to afford to buy their own homes.
When will the Bank of England lower the base rate?
The Bank of England's Monetary Policy Committee (MPC) is under pressure to reduce the base rate, and at least one or two reductions seem likely this year. The MPC is expected to hold the Bank Rate again on Thursday, as analysts say the Bank is waiting for clearer inflation signs before they try to boost the economy.
When the Bank of England finally reduces the cost of borrowing from 5.25%, some lenders will probably be able to provide lower mortgage rates as longer-term expectations of funding costs reduce. This outlook has led to an increase in the number of borrowers opting for two-year fixes rather than five-year deals.
Over the last few months, the new benchmark for a decent fixed rate has been 4% but it is currently 4.25%. Fewer borrowers seem to be opting for tracker rates unless they are looking for flexible mortgages without early repayment charges.
Click here to view Trinity Financial’s latest large loan table.
