With Brexit seemingly just around the corner and the possibility of further increases to the base rate, 2019 looks set to be a volatile year for the mortgage market.
While this could be a cause for concern in the long run, current uncertainty means that competition between mortgage lenders is fierce and opportunities for you to grab a great deal are plenty. So, whether you're a first-time buyer or a buy-to-let landlord, being proactive in the early part of the year could end up saving you thousands. Here's a rundown of the trends we expect to see emerge in the mortgage market over the course of 2019:
The number of first-time buyers being accepted for mortgages with low deposits is increasing, signalling that now could be a good time to land a great deal if you're looking to get on the property ladder. This price drop for 95% mortgages is in contrast to the current trend at lower loan-to-value (LTV) levels, where rates have been rising. The battle for new mortgage customers should continue, meaning even more competitive rates could potentially become available. Here are some other possible changes which would also benefit first-time buyers:
Young people are finding it increasingly difficult to save a deposit and, in response, the Building Societies Association has been trying to convince its members to be more lenient when it comes to first-time buyers. Since the financial crisis in 2008, 100% mortgages have disappeared. Whilst bringing them back would be a controversial move, there's a good chance of these deals coming back to the market in 2019. If they do, they'll probably be reserved for people in certain professions or those with a very strong credit record and proof of significant income.
Professional mortgages started to make a comeback towards the end of 2018, and they should continue to grow in number over the next 12 months. Lenders usually cap their offers around 4.5 times the annual income of the applicant (combined income if it's a joint application), but professional mortgages allow those in certain professions (e.g. doctors and dentists) to borrow up to 6 times their salary. Lending at multiples of over 4.5 is considered to be a risk, however, the high levels of competition could see more lenders offering these types of deals in the future.
Second steppers can often have a harder time finding a mortgage for their next home than they did finding their first. Low wage growth and increasing house prices have created an affordability gap which can be hard to overcome. With uncertainty around Brexit becoming a major concern, many are resolving to stay put, which could mean that lenders are incentivised to offer low-cost remortgage deals in the near future.
If you're looking to remortgage, you're most likely looking for a deal with an LTV ratio around 60-80%. Historically, these LTV levels have offered great rates. However, they've been creeping up in price in recent months. With further increases to the base rate on the horizon, the chances of rates coming down are low. Longer-term fixes will offer the best value in this area of the mortgage market and cashback/fee-free incentives will grow in number as lenders look to woo remortgage customers.
Everybody knows by now that staying on your lender's standard variable rate (SVR) costs you thousands more than the best deals. If you're looking to remortgage, now represents an opportunity to do so at a great rate. Five-year fixed-rate mortgages are increasing in popularity and, as such, offers are becoming more competitive. With switching offering savings of up to £4,000 per year, many people are likely to opt for a deal of this kind in 2019.
Last year, lenders began offering remortgaging products to those with Help-to-Buy equity loans. Most of the deals on offer, however, require you to pay off your equity loan in full, with little available to those who can't afford to do that. More people are coming to the end of their fixed terms in 2019, and as such, we expect to see more lenders launching mortgages for those with Help-to-Buy loans.
Landlords have had a tough time over the last couple of years, but 2019 might just offer some relief. New affordability criteria introduced in Autumn 2017 have made it harder for some landlords to secure loans, with lenders increasing the minimum interest cover ratio (ICR) to 145% or more. This means that rental income has to be at least 145% of the proposed mortgage repayments before they'll approve a loan. Lenders are beginning to relax their ICRs, with deals now available at an ICR as low as 125%. This should encourage more lenders to follow suit, meaning the buy-to-let mortgage market could become a little more enticing to would-be landlords.
In October last year, five-year fixed-rate mortgages for landlords hit an all-time low of an average 3.4%. Lenders also began to offer ten-year fixes on buy-to-let mortgages, another proposition which could increase in popularity throughout 2019. As with remortgages, fee-free deals are growing in availability, as lenders seek to tempt landlords who are looking to refinance their portfolios. Cashback offerings on buy-to-let mortgages also look set to increase over the coming year.
The easiest way to find a great mortgage deal is to speak to a broker with access to the whole of the mortgage market. Whether you're buying your first home or looking to grow your property portfolio, Key Mortgage Advice can help you find a mortgage perfectly suited to your circumstances, usually at no extra cost! Visit the Contact Us page and fill in our simple form to get a free callback!
New research by consumer group Which? has found that less than half of UK homeowners know the exact mortgage rate they are paying. Over a third of those surveyed had no idea at all what rate they were on. Only 27% of people were able to recall their exact mortgage rate and 25% were found to be on SVR mortgages - a statistic which is worrying, at best.
SVR mortgages (standard variable rate) are mortgage providers' standard deals, which you are put on once the introductory period of your mortgage comes to an end. The rate varies from lender to lender and is affected by changes to the Bank of England's base rate, among other things. Most importantly, however, it is almost always significantly higher than the rate you were originally paying. The survey by Which? gave Clydesdale Bank as an example. They offer a market-leading initial rate of 1.79% during the introductory period, but then the rate jumps up to 5.2% (variable). That stands above the average SVR mortgage rate, which (according to Moneyfacts) is 5.11%.
Researchers looked at what this would mean for a person who bought a house at the average UK price (£231,422) on a 90% LTV mortgage. Paying back a £208,279 loan over a 25-year term, they could pay as much as £347 a month more once the introductory period is over and they lapse onto the SVR. This would cost them more than £4,000 extra per year!
Anyone who has come to the end of a fixed term (usually 2 or 5 years) and hasn't remortgaged is likely to be on their lender's SVR. A shocking generational disparity shows that almost twice the number of those in the 60-69 age category were on SVR mortgages (34%), compared to just 18% of 25-34 year-olds.
Our Director, Sharon Duckworth, says: "It's worth checking to see if you're on an SVR mortgage, as you could be wasting money. The market is very competitive at the moment and there are some fantastic mortgage deals for homeowners to take advantage of."
Which? found that, of those who had had their mortgage for more than 5 years, only 50% said they were happy with their deal. Alarmingly, 41% of all homeowners on SVR mortgages said that they would be "unlikely to switch if they came across a cheaper deal today". Reasons given for not switching from SVR to a better deal were that “it wasn’t worth the hassle” and “they hadn’t thought about it”. However, only 17% though that it "wasn't worth their time".
Today, other types of mortgage deals offer much lower average rates, including fixed (2.98%) and tracker (2.81%). Compared to the average SVR (5.11%), they offer exceptional value.
If you're thinking of remortgaging, it's worth speaking to a whole-of-market advisor, who will have access to all of the best available deals. Key Mortgage Advice are one such advisor, with offices in Preston, Garstang and Southport. You can arrange a free mortgage consultation with us via phone, email, or by popping in to see us. All of our contact details can be found on our Contact Us page.
There has been little change to the best fixed-rate mortgage deals on offer, despite the base rate being increased four weeks ago. Some lenders have even reduced their rates, suggesting there's still time for people nearing the end of their contract to secure a better deal.
The Bank of England increased the base rate from 0.5% to 0.75% at the beginning of August, meaning those on SVR or tracker mortgages will see their payments go up, with many lenders bringing these changes into effect this weekend. It was expected that fixed-rate deals would also be impacted by the change to the base rate, however, they have largely stayed the same since the hike. This could be because the base rate increase had already been factored into current prices - rates have been rising steadily since their lowest-ever point last November.
Rates remain historically low and are only expected to increase. Those looking to remortgage or purchase a property within the next six months might want to think about locking in a great deal today, whilst they're still available.
Movements in the rate for fixed mortgage deals have been tiny, so far. Since the base rate hike, the best two-year fixed-rate mortgage deal has increased by just 0.03% (was 1.35% now 1.38%). The best five-year fixed deal has not increased at all (1.83%). These examples assume a £200,000 property with 60% loan-to-value.
A few lenders (including Barclays) have even reduced their rates on fixed-rate mortgage deals, though they're still not the cheapest. This is probably in order to remain competitive.
However, there's no guarantee that the increase in the base rate won't have a larger impact on fixed-rate deals going forward. So, if you're thinking of applying for a mortgage in the near future, it's worth seeing what's available to you today.
If your current deal ends within the next six months, or you're looking to buy a property in that time, start looking at mortgage deals now. Most lenders have a "lock-in" period, meaning you can secure a deal at today's rates to start at any time within the next six months. Some lenders have even longer lock-in periods, allowing up to twelve months, though usually only for those purchasing a new build.
Anyone who hasn't reviewed their mortgage for a while should take action now to see if they can make a saving. Taking advantage of the current low fixed-rate deals could also protect against future increases in interest rates. Even those still in a deal can secure a low rate now which will still be valid when their contract comes to an end.
For free, impartial advice from friendly experts in the mortgage market, book a consultation with Key Mortgage Advice via the button below. We have offices in Southport, Preston and Garstang, or we can assist you over the phone.
Around one in three of all mortgage loans taken out are for the purpose of remortgaging – A remortgage being the acquisition of a second mortgage loan, often used to replace an existing mortgage or borrow money against the value of a property.
The most common reason for someone to consider remortgaging is that they could be saving money by switching to another mortgage provider. However, many people are still reluctant to shop around for a new mortgage, despite it often being their biggest financial commitment. That being said, there are certain circumstances which regularly prompt people into action:
If you took out a fixed-rate mortgage when you purchased your property, the end of your initial term is the perfect time to consider remortgaging. The initial term will end after 2, 3, or 5 years, depending on the deal you agreed with your lender. Once it has ended, you will be switched to your lender’s standard variable rate (SVR) which could see you paying a higher rate than you were before. If this is the case, it’s worth shopping around to find a cheaper deal.
You might be considering a remortgage because you’ve seen better rates advertised. It’s important to bear in mind that some mortgages have early repayment charges (sometimes called exit or admin fees), which may well offset any savings you’ll make by switching. Remember to take any additional charges/fees into account when calculating savings, and to contact your lender if you’re unsure as to whether you’ll be charged.
This should be possible without the need to remortgage. In most cases, your lender should be happy to arrange this for you if you contact them. Problems would only arise if you wanted to switch to an interest-only payment plan after agreeing terms for a repayment mortgage; in that scenario, your lender would likely be less accommodating. Either way, remortgaging is an option if your lender is unable to offer you the deal you’re looking for.
Sometimes, circumstances change and we find ourselves in a better position then we might have expected. If you’ve received a promotion or found a better-paying job, it makes sense that you might want to pay off your loan a little faster. However, not all lenders allow this. If this has happened to you, you may well be considering a move to a more flexible mortgage. Take into account any early repayment charges or exit fees on your current deal, and if it still seems viable, a remortgage could be the solution.
The Bank of England increased the base rate in November 2017, meaning those with tracker mortgages and those on SVR deals saw their rate rise by at least 0.25%. With talk of further increases to the base rate in the future, anyone wanting to avoid them might see this as a good time to find a fixed-rate deal. Remortgaging purely to avoid a speculated rate increase is somewhat of a gamble, it is recommended to speak with an independent financial advisor.
If you want to borrow more money but your current lender has denied your application (or offered terms you find unacceptable), remortgaging could be a good way to borrow more at a better rate. However, don’t forget to take into account those early repayment charges/exit fees. The new lender will want to know why you’re looking to borrow more, with home improvements and debt consolidation being the most common acceptable reasons. Be prepared to be asked for proof in the form of workman’s receipts or loan statements if you’re asking for a large sum.
If any of the above applies to you, or you’re unsure of whether you’d save money by remortgaging, contact us via the button below and we’ll talk you through it! We have access to the whole of the mortgage market and are positive that we can find you the best possible deal!
