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Quarterly market review: Mortgage market leans heavily on product innovation

Posted: 22/10/2018

The biggest news this quarter was the base rate rise in August to 0.75%, the highest level since March 2009. Lenders were quick off the mark, increasing their SVR’s and there was a burst of remortgage activity prior to the announcement. Statistics released by the Bank of England show mortgage activity increased in Q2, with new commitments at their highest level since Q1 2008.

It’s predicted that activity will remain high in the autumn months when as a result of the rate rise in early August, homeowners receive their new, higher mortgage bills and look to switch.

The Halifax Price Index for September shows that prices increased 3.7% on an annual basis, leaving the average house price at £229,958. Halifax research also shows first time buyers made up 51% of mortgaged purchases in 2018 versus 38% a decade ago. UK Finance suggests that the average first time buyer is age 30 and has a gross household income of £42,000.

Every political and economic decision being made is affected by Brexit.

The good news is that lenders are increasing the number of 95% products with new players coming back into the market all the time. Other big improvements include; changing residency criteria, increasing loan sizes and more lenders now offering joint borrower sole proprietor products.

Increased innovation coupled with competitive solutions is continuing to drive the mortgage market forward with the number of products surpassing 5,000 for the first time in over a decade. Meanwhile, Government schemes like Shared Ownership and Help to Buy are giving thousands of first time buyers that extra bit of support they need to secure their first home. However, affordability remains a challenge for many prospective borrowers, underlining the importance of clarity over the future of schemes such as Help to Buy.

There was 5,500 buy to let purchases completed in the July, some 14.1% fewer than in the same month a year earlier. By value this was £0.8bn of lending in the month, 11.1% down year-on-year.

The buy to let market is constantly changing. There is more reform coming for houses in multiple occupation, with changes to licensing in October. Landlords will need a HMO Licence for all properties with five or more occupiers and a minimum floor space has also been introduced.

Due to the barrage of legislation and tax changes, many smaller landlords are considering whether or not to continue. Demand is still outstripping supply but not at the same level as recent years. Long term growth in this sector seems likely as the average length of a tenancy (currently 22 months) continues to increase. One thing that is clear is those landlords remaining in the market need to be in it for the long haul.

By Nikki Haworth, Sales & Marketing Director, Ingard