Category: Mortgage

Around one in five new first-time buyers took out mortgage terms stretching beyond 35 years in the first quarter of this year, according to a trade association.

Some 21% of people taking their first step on the property ladder had home loans lasting for more than 35 years, UK Finance said.

The trend of longer-term mortgages is “further evidence of the ongoing affordability crunch”, as costs and house prices remain high relative to incomes, UK Finance said.

Its review added: “Although the proportion of borrowing at up to 40-year terms eased slightly in (quarter one), it remains far higher than we have seen in the past.

“This is the case for all types of borrower, but most significantly amongst first-time buyers.”

UK Finance said most first-time buyers typically do not keep their mortgage over the full term because they move house or remortgage.

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HSBC has increased the cost of selected fixed-rate mortgage deals across its residential and buy-to-let ranges, writes Jo Thornhill.

Its new remortgage rates, available direct and through brokers, start from 4.99% for a two-year fixed rate (60% LTV) with a £999 fee and 4.54% over five-years.

A number of the bank’s product transfer deals (rates available to existing HSBC customers looking to switch), have also been increased.

Brokers are braced for more lenders to increase rates this week. This is due to rises in swap rates, the rates banks use to lend to each other, as hopes fade for a cut to the Bank of England Bank Rate in June.

The reduction – from the current rate of 5.25%, probably to 5% – is now expected in August.

A number of smaller lenders, including the Hanley Economic, Principality, Saffron and Vernon building societies, have withdrawn selected mortgage deals at higher loan-to-value ratios, such as 90% LTV and 95% LTV.

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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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Virgin Money will be launching a number of new products as of tomorrow, Thursday 30th May.

As part of its purchase exclusive range, the lender will introduce a new 90% loan-to-value (LTV) Greener new-build 5-year fixed rate with £995 fee and £300 cashback at 4.87%.

In its product transfer range, it will add a 90% LTV residential 2-year early repayment charge (ERC) free tracker with £495 fee at 6.19%, and a 75% LTV buy-to-let 2-year ERC free tracker with £995 fee at 6.45%.

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Around 95% of people intending to move home say the election will not impact their plans, a survey has found.

Last week, Prime Minister Rishi Sunak confirmed that the general election will take place on 4 July.

This is based on a Rightmove survey between 18 and 23 May that garnered around 14,322 responses.

Historical Rightmove data around buyer demand for the 2015 and 2019 elections show “steady activity” in the lead-up to the vote.

This is measured by the number of people sending enquiries about properties for sale on the site, and year-on-year (YOY) changes had been used to mitigate seasonal peaks and troughs in the market.

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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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