There are positive signs for this year, with 2013 continuing where 2012 left off.
Lenders are increasingly slugging it out in an ever more competitive mortgage pricing war. Fixed rates have fallen almost month on month since the middle of last year and we see no let up in this trend in the short term as lenders look to attract business.
The government-led initiative Funding for Lending has undoubtedly been the catalyst for lenders increasing their appetite by making cheaper funding available to lenders, who have stepped up and responded to the challenge. As has been widely reported in the media, many of the headline rates – we know several lenders offering products at below 2% for two-year fixed rates – are generally only available to those with large deposits and/or high levels of equity.
As a consequence we are already starting to see that, as the customer sector gets increasingly congested with all lenders trying to compete for the same customers and only so much business to go around, rates are being cut further up the loan-to-value risk curve.
Currently we have fixed rates for two years at up to 85% LTV under 3.5%, and where the borrower wants certainty for longer, rates significantly below 4% are available for five years at the same LTV. In addition mortgage products for that most rare of customer, the first-time buyer, are also more in evidence and here also rates have reduced.
Mortgage rates for first-time buyers can now be found at 90% LTV on a two-year fixed basis and below 4%. Also, a number of products are below 5% for those who want to lock in for five years.
We also have several 95% LTV products, although this sector is still under-served, but recent innovation has entered the market from Woolwich Mortgages from Barclays, with their Family Springboard Mortgage. This product allows a borrower to access a 95% LTV product provided a family member can contribute 10% of the property purchase price into an interest earning savings account with the bank for three years.
The last few years have been starved of innovation due to capital and regulatory constraints on lenders, and this type of initiative is very welcome and may appeal to parents or close relatives who wish to help their children and relatives get established into their own home but who don’t necessarily want to gift them the deposit.
With trade bodies including the Council of Mortgage Lenders reporting more positive activity latterly in 2012 around the number of mortgages sought and in particular from first-time buyers, the housing market has some genuine reasons to be cautiously optimistic.
Brian Murphy is head of lending at Mortgage Advice Bureau
Comments
Funding for Lending is not medicine but poison. It is not curing the housing market but keeping the zombie housing bubble groan on.
Is it really sustainable that 0.5% base rates and FFS add a tiny bit of interest in a depressed market.
Green shoots dying round here yet again, the ground is poisoned.