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? Here are three key points to consider.

first-time investors
  1. 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 a number of 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).

  1. Better deal with record low rates

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

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, or are in a fixed rate period, now is a good time to review your options as the cost of the early redemption combined with a lower interest rate could be better than sticking with your current rate.

The combination of low remortgage rates and the effects of Stamp Duty 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 has allowed some homeowners to remortgage with access to even better rates due to being in a lower loan-to-value bracket.

Other remortgage situations have been due to properties that have been inherited and need to be remortgaged to release equity on the property to pay off any outstanding mortgage debt.

  1. 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 backburner. 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 that the demand for property is still high and therefore demand for competitive mortgage deals will prevail.

Post-Pandemic Mortgages

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 life balance and finances after a tumultuous time).

Attractive low rates aren’t the only thing to consider when searching for the ‘best deal’. Consideration of 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, redemption fees etc also need to be factored in.

If you would like to discuss any of the points above, or start to look into mortgage options, our Mortgage Adviser, Alan Ramsden can be contacted on 020 3030 4164 and would be happy to discuss options with you on a call, over video or in person.

Grosvenor Wealth Management’s independent mortgage advice service ensures your mortgage requirements are fully met. Whether you are looking to purchase, re-mortgage or buy an investment property, we are confident we can secure the right arrangement for you.

PLEASE ALWAYS REMEMBER: Your mortgage is a loan secured against your property. Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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