Category: Industry News

• Santander and Barclays latest lenders to reduce rates
• Nationwide has reduced mortgage rates by up to 0.20% 
• Halifax’s reductions apply to mortgages arranged via brokers
• Average rates on fixed mortgages have continued to fall since November

Major mortgage lenders are reducing their rates, as the average cost of a fixed rate mortgage continues to fall from the highs seen last year.

Nationwide has reduced interest rates across its mortgage range by up to 0.2 per cent, with the cheapest fixed deal now at 4.34 per cent.

The price cuts include low-deposit mortgages, aimed at first time buyers, as well as remortgage products.

A five-year fixed rate on a 10 per cent deposit mortgage is now 4.79 per cent, with a £999 fee – a reduction of 0.1 per cent.

There is also a five-year fixed rate on a 40 per cent deposit mortgage at 4.34 per cent, reduced by 0.09 per cent. It also comes with a £999 fee.

Tracker rates have also come down by up to 0.2 per cent, on two, three and five year initial terms. A two-year tracker rate on a 40 per cent deposit is now 3.79 per cent with a £999 fee, reduced by 0.20 per cent.

This will hopefully trigger a new price war in the mortgage market, and about time too 

Will mortgage rates go below 4%? 

 Mortgage rates rose rapidly at the end of last year, thanks to uncertain economic conditions in the UK and the fallout from the disastrous mini-Budget in September, but they are now slowly falling. Interest on the average five-year fixed mortgage has dropped well below 6 per cent to 5.42 per cent, as more lenders reduce their rates. Two-year fixed rate deals are now at an average of 5.6 per cent, according to Moneyfacts. But the best deals available now are heading towards 4 per cent, with rates as low as 4.04 per cent on a 10-year fix for those with large deposits.

Halifax has also announced rate reductions across its product range for intermediaries. These are rates which are only available to those who go through a broker, rather than directly to the lender.  The reductions have been applied to fixed rates for home buyers including first time buyers and affordable housing schemes including shared ownership, as well as its range of green home products.

What to do if you need a mortgage?

 Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

 What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker. Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

By Fran Ivens For This Is Money

New sales activity in the housing market is holding up in the last week. High mortgage rates do not hit all buyers equally and I remain hopeful that borrowing costs will be lower as we start 2023.

 Key Takeaways

• It’s early days, but I remain optimistic that mortgage rates will be lower as we start 2023
• There are minimal chances of negative equity after strong post-pandemic price growth
• Sales are still being agreed in the last 2 weeks as those keen to move and with cheap mortgages in place continue with sales
• Higher mortgage rates do not hit everyone: 30% of sales are with cash and a further 20% are with smaller-sized mortgages
• For now, it’s like Christmas has come early for the housing market with lower activity from new buyers in the aftermath of the mini-budget.

1. I’m Hopeful Mortgage Rates Will Start To Fall Back Soon

This week’s reversal of tax cuts announced in the mini budget seems to have calmed the markets. Borrowing costs are starting to fall for government debt and the all-important interest rates that set the cost of a fixed-rate mortgage.

Mortgage rates for new borrowers remain over 6% but I believe there are very early signs that this could start to fall back further in the weeks ahead.

This is important as the outlook for the UK housing market next year really hinges on the level of mortgage rates for buyers entering the market from January 2023 onwards.

Our analysis has always suggested that mortgage rates of 4% were manageable for most buyers. Rates reaching 5% or higher would be more of a tipping point with the likelihood of some localised price falls and fewer sales.

Looking ahead, what really matters now is the outlook for inflation – in particular, how much more central banks need to increase the Bank Rate to bring inflation under control in the UK. We will know more in the next 2 weeks.

As soon as we get signs that inflation is starting to peak, the financial markets should start to take a very different outlook on borrowing costs. This will start to reduce the cost of 5-year mortgage rates which account for more than 60% of all new loans.

It’s early days, but I remain optimistic that mortgage rates will be lower than they currently are as we enter 2023.

However, home buyers need to realise that sub-2% mortgage rates are a thing of the past, enabled by cheap money over the last decade. 4% is likely to be the new normal for mortgage rates.

2. There Are Minimal Chances Of Negative Equity

Strong UK-wide house price growth over the pandemic has added to the equity buffer for homeowners. New borrowers have not relied on large mortgages to pay more for homes.

There is a huge equity buffer to absorb any reductions in sale price, and this will allow for the hit to buying power for new home buyers.

Find out how much your home is worth

We calculate that a nationwide 15% reduction in house prices from today’s levels would result in very few cases of negative equity for mortgaged sales up to the end of 2021.

This highlights how the UK housing market has become increasingly equity driven and is much less dependent on high loan-to-value (LTV) borrowing over 90%.

3. New sales are still being agreed despite uncertainty

 Looking back over the last week’s activity from homebuyers on Zoopla, we see that interest from new buyers continues to weaken – it’s down a further 8%. Those who haven’t managed to arrange cheaper mortgages are stepping back from the market, creating a sense that the Christmas seasonal slowdown has started early.

However, sellers and buyers continue to agree new sales across the UK. The rate at which new sales are being agreed is slowing – down 25% on this time last year – but sales have not stalled. This shows that there are committed buyers in the market who want to press on and secure a sale.

Mortgage rates are important for many buyers, but life-related decisions and other pressures will continue to bring a flow of buyers and sellers into the market. However, this is and will be at a slower pace than earlier in 2022.

4. 30% Of Sales Are Cash Buyers

Higher mortgage rates are deterring buyers who need a large mortgage to buy a home. But not everyone needs a large mortgage.

3 in every 10 home sales in the UK were paid for in cash last year. A further 20% of buyers use smaller-sized mortgages, and the increase in borrowing costs will be much smaller and less of a disincentive to move for them.

Cash buyers account for almost 40% of sales in the South West. But in London where prices are highest, less than 1 in 5 sales are paid for without a mortgage.

We have seen the proportion of cash buyers increase over the pandemic with more moves by older homeowners and those who have paid off their mortgage. Over half of all homeowners don’t have a mortgage at all.

However, most people buying a home do rely on a mortgage so the increase in rates is important for the UK housing market outlook.

By Richard Donnell of Zoopla

October 2022

As inflation keeps rising, we look at what a 3%, 5% or 7% base rate would mean for homeowners and buyers.

• Base rate has increased from 0.1% in December to 1.75% now
• Even modest further rises will be a shock to borrowers who are used to low costs
• Rises come amid a turbulent backdrop of sharply rising food and energy prices

Earlier this month the Bank of England increased its base interest rate by 0.5 per cent – the biggest single increase in 27 years.

It is the latest in a string of rises. The base rate has risen from 0.1 per cent in December to 1.75 per cent now, and the Bank’s Monetary Policy Committee has signalled it is willing to go further.

In its latest report the Bank predicted that inflation, more specifically the consumer price index, will soar to 13.3 per cent by the end of the year.

Mortgage rates have been going up due to the rising base rate, amid a backdrop of soaring energy bills and food prices. Since January 2022, interest on a typical two-year fixed mortgage has jumped from 1.3 per cent to 3.46 per cent, according to analysis from L&C Mortgages, increasing average monthly payments by around £159.

Understandably, borrowers are keen to understand how much further they might go. Part of the answer may lie in the ongoing Conservative leadership campaign being played out in the background.

As the two candidates, former Chancellor Rishi Sunak MP and current Foreign Secretary Liz Truss MP battle it out to win over the Tory membership, the impact of their economic policies on people’s finances has been a topic of debate among experts.

Some say that the tax cuts proposed by Truss would lead to a base rate as high as 7 per cent. While a base rate that high might seem unthinkable to younger borrowers, there is a historical precedent. UK interest rates have averaged 7.15 per cent between 1971 and 2022, reaching an all-time high of 17 percent in November 1979.

Capitalising on this, Sunak’s campaign has created an online tool to calculate how much a 5 per cent base rate would increase the interest on people’s mortgages.

What would happen to the base rate under a Rishi Sunak premiership is less clear

Some say that Liz Truss’s tax cuts could hike the base rate to 7%, while what would happen to the base rate under a Rishi Sunak premiership is less clear

The Situation Today

Over the past few months the market has been quick to react to the rising base rate, with mortgage rates increasing even before the central bank’s announcements.

This is a problem for mortgage holders, says mortgage broker L&C’s David Hollingsworth. Borrowers have become accustomed to low rates and those who are coming to the end of a fixed deal will be in for a payment shock which will cause ‘some pain’.

Anyone on a tracker mortgage will automatically see their rate increase by the same amount as the base rate rises, while those on standard variable rates are also very likely to see costs rise.

However, 76 per cent of borrowers are on a fixed rate – and so the pain from higher rates will filter through to borrowers quite slowly as their deals come to an end and they remortgage.

Impact of a rise to 3 per cent 

The average two or five-year fixed rate currently stands at around 3.5 per cent.  Assuming that rates rises are broadly reflected in fixed mortgages, then that could mean an average of 4.75 per cent if the base level rose to 3 per cent.

Looking at SVRs, the current standard rate at Lloyds, to take on example, is sitting at 5.24 per cent after the most recent 0.50 per cent increase.

If an increase to 3 per cent was directly reflected in SVR, then that would mean a rate of 6.49 per cent. However, Hollingsworth says that this is a too simplistic view.

‘Even the increases in SVR could become more measured if base rate was to rise so substantially,’ he says.

‘When base rate was mid-5 per cent in 2007, the SVRs were not that high and often operated around 2 per cent higher than base rate.’

A £150,000 mortgage at 5.24 per cent over 25 years would cost £897.99 per month. At 6.49 per cent the price rises to £1011.87 – an extra £112.88 a month.

A bump in the base rate, even to 3 per cent, would have a significant impact on the housing market according to Raymond Boulger, senior mortgage technical manager at broker John Charcol.

‘Based on current market expectations of bank rate peaking at 2.5-3 per cent, I think that house prices will fall modestly next year, by about 5 per cent,’ he says.

‘But if the bank rate was to increase beyond 3 per cent, I would expect a greater fall. That would indicate inflation remaining high for longer than currently expected, with all the impact that would have on cost of living pressures.’

Impact of rate rises to 5 per cent and further

At 5 per cent, mortgage experts say that the market would begin to see significant stress.

According to L&C’s calculations, a rise in the base rate to this level would see SVRs climbing to 8.49 per cent, or £1206.83 a month on a £150,000 mortgage –  increase of £308.84 on today’s levels.

‘An increase to a 5 per cent bank rate would make life very difficult for many borrowers when their fixed rates end’, says Boulger.

‘Many would not pass the affordability test to remortgage, but they would still be able to get a new deal from their lender with a product transfer.’

At 5 per cent, monthly payments on a £250,000, 30-year repayment mortgage would be £1,462.

The effect of a 7 per cent base rate on the market would be profound, says Boulger – and that is before the rising cost of food and bills is factored in.

‘Homes which are still affordable for many people at current mortgage rates of between 3 per cent and 4 per cent would become unaffordable and a combination of less buyers and forced sellers who couldn’t afford the new higher rates when their fixed rate finished would result in a large fall in house prices.’

The last major fall in prices was between the autumn of 2007 and the spring of 2009, when prices fell by 20 per cent. If bank rates rose to 7 per cent, Boulger says the UK could see a similar drop in prices of up to 25 per cent.

What about the affordability stress test?

In theory, most people with a mortgage should be able to afford a 7 per cent mortgage rate as they would have been stress tested at around that level when they took out the mortgage. Last month the Bank of England called time on its mandatory mortgage affordability test – but most experts expect lenders to continue stress testing borrowers’ finances to similar levels.

However, broker Oli Pearce of Guild Mortgage Services says that calculation would not have accounted for the huge inflation concerns that are hitting households at the moment.

‘Although technically people are able to afford the borrowing level, they may not be able to actually afford the monthly payments,’ he says.

Pearce also mentions the impact rate rises will have on the rental market. Increasing interest rates increase costs for private landlords, he says, and that will be reflected in tenants’ rents.

‘The alternative is for landlords to start selling their stock off and reduce the availability of rental property further,’ he adds.

‘Landlords are already having to bear the brunt of improving energy efficiency in a property [to meet proposed regulations], changes in taxation and now potentially soaring mortgage costs, so tenants are likely to see their rental payments increase if it goes much higher.’

Best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.

If you are looking to buy your first home, move or remortgage, it’s important to get good independent mortgage advice from a broker who can help you find the best deal.

At Concise, we will help you through the process step by step working out how much you can borrow, how much it will cost, and what type of mortgage may be most suitable for you. We will even take care of all the paperwork for you, so you don’t need to worry about a thing.

By Fran Ivens For thisismoney.co.uk

Published: 09:31, 16 August 2022 | Updated: 10:20, 16 August 2022

Interest rates have been raised from 0.5% to 0.75% – their highest level since March 2020.

The Bank of England announced its decision a day after US interest rates were raised for the for the first time since 2018.

Why are interest rates going up?

Adjusting interest rates is one of the many ways the Bank tries to manage the UK economy.

Sine the global financial crisis of 2008, UK interest rates have been at historically low levels. In March 2020 the rate was just 0.1%.

The aim was to encourage firms and individuals to borrow or spend money – to get the economy moving.

But there is a balancing act to perform. The Bank wants to encourage spending and growth, but also to make sure that this does not lead to rising prices.

Raising interest rates – to encourage people and firms to borrow and spend less, or to save money – is one of the tools it uses to limit inflation.

Prices are now rising quickly in the UK and around the world, as Covid restrictions ease and consumers spend more.

But many firms are having problems getting enough goods to sell. And with more buyers chasing too few goods, prices have risen.

There has also been a very sharp rise in oil and gas costs – a problem made worse by Russia’s invasion of Ukraine.

Many economists expect inflation to reach 7% this year, which would be its highest level since March 1992.

How high could interest rates go?

Few had been expecting UK interest rates to top 1.25% this year.

But the Office for Budgetary Responsibility (OBR) – the government’s independent economic advisor – looked at the impact of higher and more persistent inflation.

This can happen if people think price rises will continue. Businesses could raise prices to keep making a profit and workers could demand wage increases to maintain living standards.

The OBR has suggested that if this occurs interest rates could reach 3.5%.

How do interest rates affect me?

If interest rates rise, it can make borrowing more expensive – especially for homeowners with mortgages.

Bank of England interest rates also influences the interest charged on other forms of credit, such as credit cards, bank loans and car loans.

So even if you don’t have a mortgage, changes in interest rates could still affect you.

Bank of England decisions also affect the interest rates people earn on their savings.

Individual banks usually pass on any interest rate rises to their savers – giving them a higher return on their money.

How does the Bank of England set interest rates?

Interest rates are decided by a team of nine economists, the Monetary Policy Committee.

They meet eight times a year – roughly once every six weeks – to look at how the economy is performing.

Their decisions are always published at 12:00 on a Thursday.

By Ben King
Business reporter, BBC News, 17^th March 2022

Everyone in the UK will be affected by rising prices – from a higher gas bill, to harder choices during the grocery shop.

The idea of raising interest rates is to keep those current and predicted price rises, measured by the rate of inflation, under control.

Policymakers at the Bank of England have now increased interest rates to 0.5% from 0.25%, the second rate rise in three months.

Higher interest rates make borrowing more expensive. For households, that could mean higher mortgage costs, although – for the vast majority of homeowners – the impact is not immediate, and some will escape it entirely.

Homeowner impact

Even before the Bank of England’s rate-setting Monetary Policy Committee began increasing interest rates in December, there were signs that the era of ultra-low mortgage rates was at an end.

Some lenders raised rates for those applying for a new home loan.

It has been an extraordinary period of cheap mortgages, and – in the past few months – there have even been good deals for first-time buyers unable to offer much of a deposit.

Brokers have predicted any rises in mortgage rates to be “slow and measured”, which would mean mortgages would stay cheap by historical standards for some time.

It is a little-discussed fact that only about a third of adults have a mortgage.

About a third rent their home, another third have either never had a mortgage or have paid it off. Those figures come from the English Housing Survey, which is geographically limited, but one of the most comprehensive guides available.

Some 74% of mortgage borrowers in the UK are on fixed-rate deals, so would only see a change in their repayments when their current term ends, according to banking trade body UK Finance. About 1.5 million fixed-rate deals will expire this year, and another 1.5 million will do so in 2023.

Of the remainder, 850,000 homeowners are on tracker deals, and the other 1.1 million are on standard variable rates (SVRs). They are the people likely to feel an immediate impact now the Bank rate has risen.

The increase in the Bank rate to 0.5% means a typical tracker mortgage customer’s monthly repayment will go up by £25.76. The typical SVR customer is likely to pay £15.96 more a month, UK Finance figures show.

That means a further squeeze on household budgets at a time of rising bills and when people have been used to years of cheap borrowing and relatively slow-rising prices.

Every mortgage applicant since 2014 would have needed to prove in a stress test that they can pay at a rate of about 6% or 7% – the idea being that a small rate rise may be uncomfortable, but not unmanageable, for homeowners.

However, the Bank of England is examining whether to drop that requirement.

BBC News

During lockdown, if you weren’t baking sourdough bread or flinging yourself around the living room to Joe Wicks, you were probably doing a spot of DIY.

In fact, according to new research from GoCompare Home Insurance, a whopping 61% of UK homeowners turned to DIY to improve their properties during last year’s lockdown – collectively adding more than £21.3bn in value to England’s homes.

Throughout the lockdown, a staggering £11.2bn was spent on these DIY projects. Aside from the boost, this would have afforded the economy, the outcome was a profit of over £10bn to English homeowners.

As the population was forced to spend more time at home during the pandemic, many sought out comfort from within their four walls. 55% of those who conducted lockdown DIY told GoCompare it was to make their house more comfortable.

Meanwhile, fewer DIY-ers were financially motivated, and just 13% took on these tasks with the sole purpose of adding value to their properties. Nevertheless, redecorating, re-doing the garden, and fitting a new kitchen all saw homeowners make a profit on their work.

Redecorating was the most worthwhile job, providing a remarkable £11.5bn in added value to England’s homes. Garden makeovers also left green-fingered Brits in the green, resulting in £7.1bn of total added value. However, homeowners should be cautious about how much they spend on each project, as costs can creep up, without providing the highest returns.

Unfortunately, those who splashed out on new carpet or flooring will be disappointed to find that this didn’t add any value to their house, despite homeowners spending an average of over £1,200 on this task alone.

When it comes to handyman skills, many turned to the internet for help, with a substantial 18% of DIY-ers learning via online videos. Most other homeowners were taught by family and friends, while just 10% were professionally trained, having learnt at work.

It seems that these sources gave us the skills we needed, too. A massive 97% of homeowners stated that they were happy with the results of their home improvement work, suggesting that Britons are skilled DIY-ers after all.

One such DIY-er is GoCompare’s Head of SEO, Victoria from Swansea, who spent the lockdown installing a completely new bathroom suite with her partner. They even managed to repair a leak in the process.

Victoria and her partner decided to improve their bathroom so that their home would be more comfortable during lockdown. She said: “When we looked into the costs of it all, we found that it wasn’t going to be too expensive and decided it would be nice to have better facilities while we were stuck at home.

“My partner previously worked as a plumber, so along with a few YouTube videos, we were able to install the new suite ourselves. We’re absolutely delighted with the results.”

Ryan Fulthorpe, the home expert at GoCompare, says: “The findings from our research suggest that homeowners will often be rewarded for picking up their toolkits and paintbrushes and giving DIY a go.

“Anyone who is preparing or planning to move house should take notice of this, as even a simple redecorating job could reap a financial reward, rather than just making your home more comfortable.

“However, homeowners should watch what they’re spending on a project to ensure it’s still profitable. I recommend using GoCompare’s property investment calculator to help decide if a task is worth it.”

Source: Property Reporter 2^nd December 2021

There’s no denying that recent tax changes have made the buy-to-let market less attractive for investors. Yet it’s still a tempting option with the potential for excellent financial returns. Donna McCreadie, partner and property specialist at Perrys Chartered Accountants, looks at the current landscape and explains why buy-to-let is still a viable investment.

The demise of the buy-to-let market has been much predicted over recent years. Major tax changes, a 3 per cent stamp duty surcharge, and increasing regulation have undoubtedly deterred some from entering the market.

Existing landlords have questioned the viability of their portfolio, and some have made the decision to sell up while house prices are on the increase. Indeed, a recent survey by Nottingham Building Society found that a fifth (20%) of landlords are considering selling all, or part, of their portfolios.

Yet this means that 80% are still keen to retain their assets, suggesting that predictions of a mass exodus of landlords is highly unlikely to happen any time soon. So what are the continuing benefits of investing in buy-to-let property?

Competitive mortgage deals

After a Covid-induced lull, summer 2021 saw a surge of competitive buy-to-let mortgage deals, with many lenders increasing maximum loan to value (LTV) amounts from 75% to 80%. This means that potential investors do not have to raise quite such a hefty deposit to secure a mortgage. For example, on a purchase price of £300,000, the deposit at 75% LTV would be £75,000, while at 80% LTV it would be a more attractive £60,000.

Despite talk of inflation and a potential increase in the Bank of England base rate, interest rates on all mortgages remain historically low. In the buy-to-let arena, lenders have started to reduce interest rates and offer fee-free options.

Rise in rental demand

Buying an investment property is the first step, but how can you be sure of finding a tenant? The good news is that rental demand has picked up significantly since the last UK lockdown ended in spring 2021.

The estate agency trade body Propertymark reported a record number of new prospective tenants registering for homes in May. In June this year, there was an average number of five viewings before a property was let, indicating strong demand and confirming that landlords are generally able to choose the most suitable tenant for their property.

According to the English Housing Survey, nearly one in five households in England live in the private rented sector – that equates to over 4.4 million households nationwide. 17% live in the social rented sector and 65% are owner-occupiers.

With property prices continuing to rise, homeownership is becoming increasingly unrealistic for many. Some experts predict that the UK will become a nation of predominantly renters by 2045, with 55% per cent of the population living in the rental sector.

Increased regulation – a recipe for happier tenants?

It’s fair to say that most landlords will greet news of extra regulation with a groan rather than a cheer. In recent years the number of regulations has increased, with myriad laws and obligations that every landlord must abide by. These include anything from fitting smoke alarms and carbon monoxide detectors to issuing annual gas safety certificates and ensuring that electrical devices are safe to use.

While these measures may eat into a landlord’s time and profit, it should never be forgotten that they have been introduced for a good reason. Landlords have a responsibility to ensure tenant safety and rectify any repairs or faults within a reasonable time frame.

In the long term, this can only be a benefit: recent data from the English Housing Survey shows that 83% of private renters are very or fairly satisfied with their accommodation. Happy tenants can lead to longer-term lets, thereby minimising the risk of missed rental income while a flat or house is left empty.

Your investment has the power to grow

With interest rates continuing to remain so low, cash kept in savings accounts has little or no return. Historically, property in the UK has proved a sound investment. Despite a property value crash at the start of the 1990s and another slump following the 2008 global financial crisis, house prices have risen astronomically over the long term, with current property prices at an all-time high.

In 1980 the average property cost was around £20,000 and today it is just over £250,000. This means there are two potential profit channels when you enter the buy-to-let market: rental yield and the chance to make a good return if property prices go up and the decision is made to sell.

Discuss the pros and cons with an expert

It’s clear there are still many reasons why property investment remains a sensible financial move. There’s much to consider, however, including the tax implications, upfront stamp duty costs and letting agent fees if you decide to outsource the management of the property.

Speaking to an accountant with expertise in the buy-to-let market is always advisable before committing to a purchase. As a potential landlord, it’s important to carefully consider your current income position, future financial goals, and your obligations towards your tenants.

For anyone just starting out, it can seem a daunting landscape. But with the right advice and realistic expectations, the rewards could easily outweigh the challenges.

Source: Property Reporter, 17^th November 2021