Category: Mortgage

More than one in 10 borrowers will escape the mortgage crisis unscathed, analysis suggests.

Some 1.6 million out of more than eight million mortgage borrowers in Britain are locked into five-year fixed mortgages taken out around the pandemic property boom years when interest rates fell to historic lows.

They are not due to refinance until 2025 or after, when analysts now expect interest rates will have reverted back to far more manageable levels.

It means hundreds of thousands of people who took out loans to buy residential property from 2020 onwards are likely to escape the era of surging interest.

This will likely come as welcome news for those concerned high rates would act as a drag on house prices.

Fears high interest rates would lead to a crash in the housing market have so far failed to materialise.

The Office for Budget Responsibility predicted in March last year that house prices would crash close to 10pc in 2023.

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Borrowers who wait for interest rates to fall before they fix their mortgage rate could ‘fall foul’ of further mortgage pricing ups and downs, a major broker has warned.

L&C said whilst speculation is rife rates may fall in the summer, those people who have come to the end of fixed rate deals but are waiting for rates to fall to fix into a new one are using a ‘risky strategy’.

For whilst interest rates may go down in June or, more likely August, this is not set in stone. What’s more, how lenders price their fixed-rate deals can be influenced by other factors.

In the last six months fixed rates have fluctuated a great deal even though the base rate has remained at 5.25%.

L&C said the average of the top ten lender two-year fixed remortgage rates dropped from 5.40% in November 2023 to 4.46% at the beginning of February 2024 before rising again to 4.94% now.

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‘Things can only get better’ was the (unintended) soundtrack to Rishi Sunak’s election announcement speech yesterday – and it’s a phrase to which most mortgage borrowers will nod in agreement.

Labour leader Keir Starmer has hailed the election as an opportunity for change. And, for those struggling to make their mortgage repayments or people worried about remortgaging to a more expensive deal, change would no doubt be most welcome.

But what could a change of government mean for your mortgage and finances? What effect might the election campaign have on the economy and interest rates?

We take a look at what mortgage experts think the general election and potential new administration will mean for homeowners and buyers.

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Mortgage borrowers who want certainty about the rate they will pay beyond the next decade are being offered the option to lock into deals lasting for 15 years.

Virgin Money has taken the unusual step of offering 15-year fixed-rate mortgages.

Its new residential range includes a 15-year fixed rate of 3.75% for borrowers with a 10% deposit with no product fee.

For those with larger deposits of 35%, there is a 15-year mortgage at 2.89% with no product fee, or a deal for the same period at a lower rate of 2.55% with a £995 product fee.

The move comes at a time when 10-year fixed rates have become increasingly popular amid economic uncertainty.

Borrowers considering locking into longer-term deals to have certainty over their payments will need to consider whether their circumstances might change during this time.

Andrew Asaam, director of mortgages at Virgin Money, said: “Fixed rates of longer than 10 years are not generally available in the UK market but, given the economic backdrop, they can be a perfect choice for borrowers who are looking for longer interest rate certainty.”

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The pros and cons of extending your mortgage – and whether it help with rising costs – has been revealed. It is estimated that 1.6 million households will be remortgaging this year from deals which were lower than two per cent.

Pete Mugleston, MD and mortgage expert at Online Mortgage Advisor, warned : “This can provide significant breathing room, particularly when the cost of living is at an all-time high.

“Lower monthly payments can also improve cash flow, allowing homeowners to allocate funds to other essential expenses or savings.” He added: “This flexibility can be a lifeline for those struggling to get on the property ladder.”

But discussing the cons, he went on and explained: “By spreading payments over a longer period, you end up paying more interest, which can significantly increase the overall cost of your home.” He added: “This extended financial commitment can impact long-term financial planning and delay milestones such as retirement or significant investments.

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Demand for bridging loans continues to be buoyant, with £196.2m transactions in the first quarter of 2024, according to contributors to the Bridging Trends data. 

Overall gross lending was up 0.4% when compared to the last three months of 2023. The most significant increase was in demand for bridging loans for business funding. These proportion of loans for this purpose almost doubled from 8% in Q4 2023, to 15% in Q1 2024 — the highest it has been since Q4 2021. 

The most common reason for arranging a bridging loan was to purchase an investment asset, accounting for 21% of loans in the quarter. This was down from 24% in Q4 2023.

However there was an increase in bridging finance to prevent a chain break in the property market. This was the second most popular purpose for obtaining bridging finance over the quarter, rising to 19% from 16% in the previous quarter.

With conveyancing delays leading to protracted home purchase transactions and the potential for a greater number of broken chains, more homeowners are turning to bridging to secure the home they want to buy. 

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The Bank of England held its Bank Rate at 5.25% in May, as was widely expected. It’s the sixth time in a row the Rate has been frozen since it rose to its current level in August last year.

The Rate had previously undergone 14 consecutive rises (between December 2021, when it stood at just 0.1%, and last August). The next interest rate announcement will be on 20 June 2024.

The plateau in interest rate rises has been made possible by continued cooling inflation. The Office for National Statistics shows that inflation tumbled from 3.2% in March to 2.3% in April. As recently as last September, the figure was 6.7%.

Experts reckoned that continued falls in the rate at which prices are rising will prompt the Bank of England to cut its Bank Rate – which helps determine mortgage rates – possibly as soon as June when the next decision is announced by its Monetary Policy Committee (MPC), or in August at the following meeting.

The next inflation figure will be announced on 19 June with the latest Bank Rate figure coming out the following day. But the significant fall in April’s inflation rate has already prompted lenders to make cuts to mortgage costs.

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HSBC is among the major banks and building societies in the UK cutting mortgage rates in a boon for homeowners and prospective homebuyers.

The bank is making changes to around 140 mortgage products with rate cuts of up to 0.18 per cent.

Here is full list of the changes to mortgage rates being implemented by HSBC, as of today:

• New Business residential rates cut by 0.04 per cent to 0.18 per cent
• Buy-to-Let (BTL) new business rates cut by between 0.04 per cent and 0.14 per cent
• Residential Switchers, customers who already have a mortgage with HSBC UK and are getting a new fixed interest rate, are seeing cuts by up to 0.11 per cent.

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A building society has launched a new mortgage deal designed for foreign nationals and expats returning from overseas.

Many people moving to the UK are shocked to learn they cannot get a mortgage on arrival, instead they have to overcome multiple hurdles put in place by lenders.

Most providers want foreign nationals to have been in the UK for at least two years and have built up a good credit file in the country, in order to demonstrate they can manage payments responsibly.

To combat these obstacles, Nottingham Building Society is offering a new mortgage deal where there is no minimum time of residency required in the UK.

There is also no minimum time remaining on a visa as borrowers are often required to have at least one year remaining on their documents. It will also require no minimum income and no UK credit history as it can access overseas credit files from 13 different countries.

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I’m a first-time buyer and hope to get on the property ladder this year.

I had an offer accepted on a flat in one of the cheaper areas of Greater Manchester. It is within easy commuting distance from the city centre where I work, and being sold at a price I can afford. I paid a £2,000 fee to reserve the apartment.

The property is an off-plan new build due to complete in three months, so I didn’t think there would be any issues. Neither did my mortgage broker who provided an agreement in principle.

However, the mortgage valuation has now come back stating there is ‘a lack of/no owner occupiers living in the immediate area’ and that it is ‘not in a saleable location.’ The application has therefore been declined.

My broker said they could try again with a different lender, but that the application would be at the mercy of the next valuer’s comments, which could say the same.

Does this mean no lender will offer me a mortgage? Could I lose my £2,000 reservation fee? Would it be unwise to proceed anyway, in case future buyers face the same issue and I am unable to sell the flat in future?

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