Rishi Sunak launched many support measures in recent months in a bid to keep the economy and property market afloat, including stamp duty reductions and a new mortgage guarantee scheme. These actions have appeared to pay off as mortgage and property data released today shows a number of positive signs.
“House prices are booming, driven by a surge of buyers keen to save while also taking advantage of the continued low rate of borrowing.
“The question is, of course, whether this clever trick will help rejuvenate the market in the long term, once the curtain finally falls on Mr Sunak’s tax reprieve?”
It also appears that much of this support has benefited those who are doing the buying, as recent data from the Bank of England shows net mortgage borrowing in March reached the highest level ever seen on its records, surpassing the previous high in October 2006 prior to the financial crash.
Additionally, according to Moneyfacts latest UK Mortgage Trends Treasury Report data, there is good news across a number of mortgage concerns:
- The number of residential mortgages on offer rose for the seventh consecutive month to 3,927. There are now 78 more deals at 95 percent loan-to-value (LTV) and 41 more at 90 percent LTV than last month, giving a boost to those with small deposits. The only tier where availability reduced was at 80 percent LTV – potentially explained by providers shifting focus and increasing the number of products launched in the higher LTV tiers.
- Following nine months of increases, the average overall two-year fixed rate reduced by 0.01 percent to 2.57 percent this month. Meanwhile, the equivalent five-year fixed rate for all LTVs increased by 0.02 percent – a fifth consecutive monthly rise – to 2.79 percent, likely attributable to the steep rise in the number of traditionally higher-rated, higher LTV products now available.
- The average shelf-life of a mortgage deal increased by three days to 32, indicating that things may be calming down in the volatile residential sector, with borrowers now having a little longer to secure their chosen product.
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Eleanor Williams, a Finance Expert at Moneyfacts, reflected on these findings.
she said: “The sense of optimism in the mortgage sector continues, with product choice continuing its climb back towards pre-pandemic levels.
“After seven months of consecutive increases and 3,927 products now on offer, this represents a 53 percent rise year-on-year and is the highest this total has been since March 2020 (5,222). This positive growth compliments recent Bank of England figures, which show a boom in mortgage borrowing to levels not seen since prior to the financial crash.
“Growth in availability was evident across the majority of LTV tiers, with the most significant increase from 34 deals last month to 112 at 95 percent LTV, as providers returned deals to this sector both as part of and outside of the Mortgage Guarantee scheme.
“The proportion of the market where deals are available at 80 percent LTV or above is now 49 percent, compared to 31 percent this time last year, which is positive news for those with smaller deposits or levels of equity.
“Borrowers considering a shorter-term fixed deal may be pleasantly surprised to see that the average overall two-year fixed rate for all LTVs reduced for the first time in nine months, dropping by 0.01 percent to 2.57 percent.
“However, the equivalent five-year fixed rate made a small rise of 0.02 percent to 2.79 percent, which may tie into the resurgence of higher LTV products, which traditionally carry higher rates.
“While these averages are both up year-on-year, it is important to remember that in general we remain in a relatively low interest rate environment, with rate reductions evident across many product brackets over the last month and some extremely competitive products on the market for eligible borrowers.
“Higher LTV products returning and rates reducing couldn’t come at a better time as house prices continue to rocket upwards, but housing supply remains an obstacle for would-be buyers and this shortfall may well continue to drive up house prices. Lenders have been vocal of their confidence in the mortgage market as the UK lockdown eases, which is refreshing to see after the turmoil the pandemic created for home movers and those looking to switch their deal for all walks of life.”
Eleanor concluded by urging savers and would-be buyers to take action on this where they can: ” It is positive to see mortgage fees and the chance to secure a new deal remain stable for prospective mortgage borrowers.
“There has been a reduction to the average fee charged (excluding no-fee deals) compared to last month and a three-day increase on the average shelf-life of a mortgage overall, which means that borrowers have around a month to secure their chosen product.
“As always borrowers would be wise to seek advice if they are looking for a mortgage, not only to navigate the boom in choice, but also to ensure they get guidance on eligibility criteria and support to secure the best option for their circumstances.”
According to Moneyfacts, the UK’s average two year fixed mortgage rate was sitting at 2.5673 percent on May 7. While optimism remains high at the moment, Miles Robinson, the Head of Mortgages at Trussle, warned all this demand could have negative repercussions down the line.
Miles concluded: “The announcement this morning demonstrates that the stamp duty holiday continues to stimulate the property market. There have been significant levels of demand for mortgages, we’ve seen applications from first time buyers increase by 106 percent year-on-year.
“Next time buyer enquiries, who have the most to gain from the tax break, have increased by 120 percent.
“However, buyers should be aware of the impact of high demand. As well as pushing up house prices, buyers can now expect delays in processing times. It currently takes 171 days to complete on a property in the UK. With less than 55 days until the stamp duty deadline, it’s unlikely that buyers starting a new transaction will complete in time.
“We advise those racing against time, to use a stamp duty calculator to help prepare for any additional costs and avoid any unwanted surprise expenses.”