As a result of the Covid outbreak at the start of the year, most 90% mortgages were withdrawn and 95% mortgages all but disappeared. However, after several months of limited availability, 90% mortgages for homebuyers are starting to come back to the market. The rates aren’t as favourable as they were before, but we will be able to source the market to find you the best rates for your circumstances.
Despite what some commentators are describing as a flat economic and mortgage market, many of you across the country are still finding ways to purchase your dream home. Whether you’re a first-time buyer, home mover or buy-to-let investor, now may actually be a great time to consider your options.
This is because of the current pricing competition amongst mortgage lenders – the competition intensified at the beginning of the year with a number of lenders cutting their rates, and this trend continued into the latter stages of 2019, resulting in current mortgage interest rates being at near-record lows.
But why are interest rates so low?
There are a number of reasons why current mortgage rates are so low. The Bank of England sets interest rates, also known as the base rate, in response to current events and expected economic performance. The Bank of England base rate can sometimes influence how much other banks and lenders charge you to borrow money.
The base rate is currently 0.75 per cent, far lower than the base rate before the financial crisis. However, despite the base rate having increased twice since November 2017, mortgage rates have remained at near-record lows.
So the main reason for the low mortgage rates we are currently seeing is the price war amongst mortgage providers.
A number of lenders cut their rates at the beginning of 2019 and the pace of cuts has been quickening in the last quarter of the year, according to Moneyfacts.
According to new figures released from Mortgage Brain’s quarterly product data analysis, two-year fixed mortgages have seen a reduction of between 3.71 per cent and 4.30 per cent in the last three months. And although smaller, five-year fixed rate mortgages have also seen reductions, with rates down between 0.46 per cent and 1.63 per cent in the same time period.
Finding the right mortgage with the right rate for you and your personal circumstances can be confusing, which is why seeking professional advice can be invaluable.
If you want to make the most of near-record low mortgage rates, contact one of our advisers today.
Mortgage prisoners are predominantly those borrowers who took out a mortgage before the financial crisis but are now blocked from switching to better rates due to changes in lending practices.
There are now an estimated 200,000 homeowners that are trapped on high interest-rate loans with unregulated or inactive firms, and are unable to switch to a cheaper deal.
Mortgage prisoners are often told by lenders that they will be unable to afford a new deal under current lending rules despite a new product offering cheaper monthly payments than their existing one.
This can be even more frustrating for those who are trapped if they have continually paid off their high monthly bills and not let their account fall into arrears. However, there may be some good news for mortgage prisoners.
So, what’s being done to help those who are trapped on high interest-rate mortgages?
An all parliamentary group was launched in May to rally support for mortgage prisoners trapped by changes to lending rules and government loan selling. The group consists of MPs from all political parties and will give support in an effort to create tangible change for people who are trapped by their mortgage.
This issue prompted MP Charlie Elphicke to present a motion in the House of Commons to force lenders to treat such borrowers as “grandfathered” as a first step towards freeing the UKs mortgage prisoners.
This exemption would allow mortgage prisoners to switch lenders without meeting the affordability assessment brought in by new regulations. The mortgage would also be permitted without any regulatory penalty for the lender.
It’s not only MPs that have acknowledged that change is needed though. The FCA stated earlier this year that it is considering a change to affordability checks, which could allow people to switch to deals that are easier to pay.
So, if any of your friends and family are some of the 200,000 mortgage prisoners in the UK there could be some positive changes on the horizon with the backing of MPs and the FCA and we will continue to keep you updated.
If you or your loved ones would like to talk through your options, contact one of our advisers today.
It’s time to gaze at the crystal ball and make predictions for the housing market in 2018. So what do we think are the
big factors that could affect homeowners, first-time buyers, and property investors this year?
Rates – Interest rates have become a hot topic after the Bank of England’s Monetary Policy Committee raised the
base rate from 0.25% to 0.5%. Although not a big climb, another increase is possible at some stage.
This would affect borrowers on standard variable rates and tracker deals, with those on a £175,000 tracker mortgage
seeing £22 added to their monthly repayments if the base rate increased to 0.75%. But borrowers on fixed rates will
of course see no change.
Housebuilding – Although a slightly maligned sector in recent years, government policies have helped drive a new
wave of housing development, with 217,000 homes coming onto the market in 2016-17.
This is up an impressive 20% on the year before, albeit still short of the government’s target of 300,000 homes a
year. But there are several indicators, such as increased construction activity, which suggests the numbers may
improve again in 2018.
Brexit – There are conflicting reports on how Brexit may affect the housing market this year. But the uncertainty
surrounding Brexit could very well have an effect on consumer behaviour, which means another unpredictable year
in store for homeowners and first-time buyers.
Buy to Let – As well as the next stage in the reduction of tax relief, there are now two more big changes coming the
way of landlords. From April, all landlords of Houses of Multiple Occupation will require a license, previously only
applied to those with property housing 5 or more unrelated occupants.
April again will see the beginning of new rules regarding Energy Performance Certificates, or EPCs. It will be now
unlawful to let or lease a residential or commercial property that has an EPC rating of F or G, which may cause
problems for landlords letting out a house or flat that does not have the required rating.
Housing Policies – The government’s flagship budget announcement that stamp duty has been abolished for first
time buyers on properties valued up to £300,000, will certainly help first-time buyers in 2018.
The Help to Buy Equity Loan, boosted in the budget with an extra £10bn of funding, will continue to support first time buyers. Young savers will also continue taking advantage of the Help to Buy ISA, which boosts savings by 25%
on monthly deposits of up £200.
If you would like further advice and information, speak to on of our advisers today!
1. Your circumstances have changed
In a very short time your circumstances can change significantly. Many life events can come and go without you considering the implications they could have on your mortgage or on your protection needs. If you think something may have changed that is of importance, such as marriage, having children, a change of job or even changes to your health, let us know so we can revisit your mortgage and protection options.
2. You aren’t fully protected
We want to make sure you are protected should the worst happen. If you didn’t take out any protection when you took out your mortgage it may be a good idea to revisit this decision. Your financial position may have also changed since you first took out your mortgage. This means you could now have more money in the budget to build on your existing cover or start protecting yourself, your family and your lifestyle.
3. You could be saving money on your mortgage
If your current mortgage deal is coming to an end you will automatically be transferred on to your lender’s standard variable rate. This means you may end up making higher monthly repayments. If you want to check you are not paying more than you need to on your mortgage, then we are here to help you.
4. You are considering investing in another property
There are many ways you can invest in property. If you are thinking of investing in a buy to let property, a holiday let or another property investment option, then give us a call and we will be able to advise you along the way.
5. You want to help your children buy their own home
If your children are now all grown up, they may be looking to fly the nest and purchase their very own property. We would love the opportunity to help them find the right mortgage. We can also give you advice on all the different ways you can help children take their first step onto the ladder.
6. To discuss the mortgage and protection market
The mortgage and protection market is constantly changing. We would be happy to discuss changes in the market that could affect your mortgage, protection or future plans.
7. You were declined for a mortgage in the past
You may have previously been declined for a mortgage. However, there are now many more specialist lenders available to us. This means we have more options to help those with complicated borrowing scenarios. So, if you have been declined in the past it doesn’t mean the door is shut forever!
Don’t forget you can refer your friends and family to us– we are always happy to help!
Remortgaging is the process of switching a mortgage to a different lender without moving homes. For many borrowers, it is also the ideal opportunity to review their personal and financial circumstances and to consider whether their current mortgage and lender is the most suitable for them.
What are common reasons to remortgage?
- Your mortgage deal has already come to an end and you have been placed on your lender’s standard variable rate (SVR)
- Your existing deal is nearing its end and you will soon be placed on your lender’s SVR
- Reduce monthly repayments and gain extra flexibility on your mortgage term
- Borrow more money, possibly for home improvements or to pay off other debts
- Release equity from your home
- The value of your home has increased substantially
- Ensure your mortgage meets your personal and financial needs
- To change to a different type of mortgage
What if you want to stay with your current lender?
If you wish to stay with the same lender when your current deal comes to an end, you can simply complete a product transfer. This means you will be placed on a new product with your existing lender.
Bank of England Base Rate- A rate of interest that is set by the Bank of England. If the base rate rises and your mortgage has reverted to SVR then your mortgage payments are likely to increase.
Early repayment charges (ERCs)- Fees you may have to pay if you wish to leave your mortgage at a specific time, for example, during the period of the initial deal.
Fixed-rate mortgage- The initial period of the deal which is usually between one and ten years where the mortgage interest rate remains the same. As a result, you can be certain that you will be paying the same amount each month for your mortgage.
Standard Variable Rate (SVR)- A mortgage deal will usually revert to this interest rate when the initial mortgage deal comes to an end. The SVR is decided by the lender and your payments may increase or decrease depending on interest rate movements.
Tie-in period- The period of time that you are tied in to your mortgage deal. If you want to leave your mortgage deal during this time you will usually have to pay early repayment charges.
Tracker Mortgage– A mortgage where the interest rate tracks the Bank of England base rate or London Interbank Offered Rate (LIBOR), depending on the lender
Want to discuss your current mortgage? To find out whether remortgaging is right for you and your circumstances, you can speak to our adviser today. We will assist you in reviewing your current mortgage and finding the best deal for you.
According to the Council of Mortgage Lenders, both residential and buy to let remortgaging is expected to continue to grow in the second half of 2017. Low mortgage rates has continued to encourage borrowers to refinance and move away from their lender’s SVR amongst tough competition between lenders.
But despite the continuing strength of the remortgage sector, homeowners are being warned not to be complacent. For those still considering the options and weighing up the benefits, the time to remortgage could be now.
A surprise result at the Bank of England
Nearly three in five people that remortgaged in May said they believed the average mortgage rate would be unlikely to change over the next 12 months. But June’s vote on interest rates from the Bank of England’s Monetary Policy Committee (MPC), kept rates at 0.25% by only five votes to three.
Despite some signs of a possible economic slowdown, three members of the committee voted for an interest rise amidst rising inflation. It has been a full decade since the Bank of England last raised the base rate and this result has ruffled several feathers in the industry.
A warning of complacency amidst low rates
There are currently millions of people sitting on their lender’s Standard Variable Rate (SVR). In fact according to the BSA, 2.5 million mortgage borrowers have never experienced a base rate rise.
Homeowners are therefore currently being urged to be wary of complacency and to take advantage, especially as lenders compete for new customers, helping drive down the cost of mortgages. Data from the Mortgage Brain shows that the cost of a five-year fixed rate loan at 70% LTV is now only 2.04%. This is a full 2% lower than it was at the start of April 2017.
But many experts are saying that after the MPC’s latest vote and due to rising inflation, we are as close to a rise in base rate as we have ever been in recent years.
If your current deal is reaching its end or you would like to find out whether you could be saving money on your mortgage, contact one of our advisers today to arrange a meeting and discuss your options.
While the current low interest rates have resulted in minimal savings returns, homeowners are also benefiting from some of the lowest mortgage rates ever seen. Rather than putting the extra cash at the end of each month into a savings account, borrowers may be better off paying it to the mortgage lender anyway.
By making over payments on your mortgage, you will pay less interest overall and reduce the balance quicker. For example: by overpaying £100 per month, on a 25 year mortgage of £150,000, the mortgage would be paid off 4 years earlier and save £18,000 in interest.
Most mortgage lenders will allow you to overpay up to 10% of the outstanding mortgage balance each year, but you should check with your lender first or you could face an early redemption charge.
The past few years have been appalling for savers with pitiful interest rates offered on standard savings accounts. Now the uncertainty over Brexit has led to many experts saying the Bank of England won’t raise savings rates until 2020 at the earliest and the next move could even be lower.
Recently the Financial Conduct Authority named and shamed 32 banks and building societies that are paying customers as little as 0.1% interest on their savings. This is often on accounts that offered a competitive headline rate, but after a period of time the rate is cut to next to nothing. There are a lot of accounts out there that are paying you virtually no interest at all, but that doesn’t mean you have to settle for meagre returns on your savings. There are a number of ways you can vastly increase your interest rate.
The first thing to do is check all your savings accounts, and find out exactly what interest rate you are getting, and if there is any penalty for moving your savings elsewhere. Anyone with an ISA that is paying a poor rate should look at transferring to a new ISA with a better rate of interest. You could also move your money into a stocks and shares ISA and invest in shares, bonds, or funds.
Alternatively, you could transfer some of your ISA savings into an Innovative Finance ISA. These allow you to invest your money into peer-to-peer lending, which offers far higher interest rates. There is more risk here, your money is being lent to individuals who could fail to repay, but as yet no-one in the UK has lost money in peer-to-peer and it has been running for over a decade. Also, your money isn’t covered by the Financial Services Compensation Scheme, so if the peer-to-peer lender went bust you could lose your cash.
If you are not sure where is best to invest your savings, then contact one of our Independent Financial Advisers to discuss your options.