Greg Cunnington, our Director of Lender Relationships and New Homes, looks at how mortgage lenders have been bringing more products back to the market since the New Year, and how this may help you increase your budget.
As you may remember from my last article the property market has remained open during the latest lock down.
With many buyers needing to move home, or looking to upgrade to get more space, combined with the fact time is running out to take advantage of the stamp duty holiday by the deadline of 31 March, we have seen a very buoyant property market.
There has also been a notable improvement in both the number of mortgage products available and the criteria lenders use to decide who to offer mortgages to over these recent weeks. And this is great news for many buyers, as it may mean a product is now available that gets you the budget you require to take the first step on the property ladder.
Let’s take a look at how this more bountiful market this may benefit you.
Increase in mortgages
It feels as though there has been a daily dose of good news coming from mortgage lenders offering better terms or new deals to the market this year.
And the statistics back this up. Indeed. Moneyfacts.co.uk, which does the number crunching on the mortgage market, revealed the number of products available has risen in February to 3,215, which is the widest choice seen since March 2020.
The 42% increase in available products since last October is also the largest four monthly rise counted since 2007.
How does this benefit me?
The increase in mortgage product availability is a reflection of how mortgage lenders are actively looking to return to areas of the market which were restricted for a large part of last year.
This means that if you looked into your mortgage options in 2020 and found you could borrow less than you were previously told, or would struggle to obtain a mortgage, things may well now be better.
Some of the areas that we have seen notable criteria improvements include:
- Maximum borrowing
- Mortgages with a 10% deposit (we will come back to this later)
- Interest only mortgage options
- Ex pat lending
- Specialist mortgages for self-employed clients
- Lower mortgage rates (we will come back to this later also)
In relation to maximum borrowing, we have seen some significant improvements from lenders here.
Last year a cap of 4.5x salary was in place from most mortgage lenders – this meant borrowers could only take out loan which was four-and-a-half times their salary.
However, in recent weeks have seen in recent weeks lenders move back to 5x salary for some client scenarios, and even 5.5x for professionals or clients who meet certain minimum income requirements.
You can see for yourself here how much you may be able to borrow, or for a more accurate assessment please get in touch to speak to one of our advisers directly.
Mortgages with a 10% deposit
One of the recent challenges in the mortgage market, for first-time buyers in particular, has been a large decrease in available mortgages for those with a 5% or 10% deposit.
The good news here is that we have seen several mortgage lenders return to offer mortgages with a 10% deposit, including almost all of the largest lenders such as Halifax, Nationwide, Barclays, NatWest, HSBC and Santander.
This 90% loan-to-value (LTV) product category saw the largest increase in available mortgage products from January to February according to Moneyfacts – it increased from 160 to 248.
This is great news, as it means buyers with a 10% deposit who have had to put their home ownership dreams on hold for most of last year can now return to the market.
We have also seen some positive changes to the maximum borrowing for these clients. Two intermediary only lenders will now lend up to a maximum of 5x income if you have a 10% deposit, which could increase your budget quite significantly as most lenders will cap at 4.5x your income.
However, you still need to be careful if you are looking to buy with a 10% deposit as some of the lending criteria is still a bit more restrictive as lenders look to slowly return to this type of lending (so the maximum mortgage offered may be lower, the credit score you need to pass can be more stringent, there is different property type criteria).
As such, if you have a 10% deposit you should definitely speak to an intermediary who can navigate the options for you here.
Some lenders are also only offering mortgages with a 10% deposit via selected intermediaries to ensure they can manage the number of applications received.
We have access to some mortgage products on a semi exclusive basic with a 10% deposit, so if you are thinking of purchasing in the near future please do not hesitate to contact us to speak to one of our mortgage advisers.
Further good news is that we have also seen mortgage rates steadily decreasing, as mortgage lenders look to attract new business by offering more competitive rates.
If you have a 25% deposit or more, mortgages rates are pretty much back to pre-pandemic levels. Fixed rates as low as 1.14% are available, so it is a great time to look into your options if you have a remortgage coming up.
If you have a 10% or 15% deposit then mortgage rates are still a little higher than before the pandemic.
However, we have seen mortgage rates coming down almost weekly here, so the options are a lot more competitive than a couple of months ago.
The regular rate changes from lenders means the most competitive option is changing weekly, so it is vital you are working with an intermediary with access to as many lenders on the market as possible to ensure you will get the best rate options for your circumstances.
Please get in touch with us if you need any further advice. You can email us at AskAlexanderHall@alexanderhall.co.uk or use the contact us page on our website – click here.
This article was originally posted in What Mortgage online. You can see the original article here. Please note this will launch a new web page.