The changing shape of mortgages

The changing shape of mortgages

It’s fair to say a lot has happened in the housing market over the past year or so with a total shutdown and three national lockdowns all taking their toll on the economy. But as we continue to see the vaccine roll-out and an easing of COVID restrictions unfold across the UK, what is the current state of the mortgage market and how can it benefit you?

More choice and low-deposit lending

One of the biggest changes to the mortgage market this year is choice. According to Moneyfacts, residential mortgage availability rocketed in May 2021 by 53% when compared to products in May 2020 showing significant growth in the market and eagerness from lenders to get people moving again. Buy-to-let deals have followed a similar pattern with investors benefitting from the highest level of products since before the pandemic started.

A significant contribution to this year-on-year recovery is found in the return of 90-95% loan-to-value mortgage products from all the major lenders. At the height of the pandemic and throughout lockdown these products were virtually non-existent. This meant hopeful first-time buyers in particular couldn’t afford the higher deposits to make it onto the property ladder. Fortunately 90% loan-to-value deals have now flooded the mortgage market again, with almost five times as many deals as last year.

95% loan-to-value mortgages are also back to stay with availability having nearly tripled from May 2020 figures (buoyed by the Government’s mortgage guarantee scheme and resumed lender confidence in the market).

If you have a small deposit and are unsure about what options might be available to you, you should speak to a professional mortgage advisor. Slater Hogg Mortgage Services has access to a wide range of 90% loan-to-value products, (some of which are exclusive) and a number of 95% loan-value-mortgage deals to help you move with just a 5% deposit.

Record low rates and competitive deals to save money

With more choice, comes more competition – which is great if you are looking for a mortgage deal to save money.

In order to remain competitive and attract new customers, lenders are frequently slashing rates on their current offers (typically 2 year and 5 year fixed deals are seeing the biggest reductions). With record low rates, if you are coming to the end of an initial fixed-rate period now is the time to review your options and consider remortgaging on to a better product, potentially making noticeable savings on your monthly repayments.

The combination of low remortgage rates and the effects of Land and Buildings Transaction tax has also influenced a surge in remortgage activity. Many homeowners who have bought a property in a rush to beat the stamp duty deadline have benefitted from a rise in property prices and have seen their loan-to-value decrease and equity increase. This means they can now look to remortgage with access to even better rates due to being in a lower loan-to-value bracket.

In some cases, properties have been inherited and need to be remortgaged to release equity on the property to pay off any outstanding mortgage debt.

With the pace of change, it is important to speak to a professional to help make sense of the different options, especially when considering debt consolidation. Remember, attractive low rates aren’t the only thing to consider when searching for the ‘cheapest deal’. You need to look at the overall cost of the mortgage product, factoring in additional fees, lender criteria and the length of time (mortgage term) you wish to borrow for. However, a Slater Hogg Mortgage Services consultant can help you understand the overall costs and find the best deal for your individual circumstances.

Demand for property still high vs. easing of restrictions

There were concerns that the changes to stamp duty in England would create a cliff edge for the housing market after the deadline had passed (having a knock-on effect on mortgage levels). Similarly, questions remain on whether further easing of COVID restrictions will spur many to seek out a much-needed holiday or reunion with loved ones over the summer months, putting their property plans on the back-burner. The tapering off of the furlough scheme may also impact people’s affordability and dreams of homeownership.

It’s very difficult to predict which way some of these changes will develop,  sentiment in the market is the demand for property is still high and therefore demand for competitive mortgage deals will prevail.

The pandemic has created a fundamental shift in how we live and work. Many wish to adopt a more flexible ‘hybrid-home-working’ approach so may need more space for a home office or wish to move away from the city as commuting is no longer an issue; as restrictions ease some may want to move closer to loved ones following a long separation or get more space to entertain; some may want to release equity on their property and remortgage to a better deal (looking after their finances after a tumultuous year).

Whatever the reason and whatever the future holds, now is a great time to start considering your options as the mortgage market is teeming with possibilities.

Contact a mortgage expert

To find out more about the current lending market or for a review of your mortgage and protection options, get in touch today.