In the last few months, mortgage interest rates have fallen significantly as speculation grows as to when the Bank of England will begin to reduce the Bank Base Rate. So, whether you are stepping on, up/down the property ladder or considering purchasing/refinancing a buy-to-let property, your mortgage is likely to be more affordable than a few months ago. However, careful thought and research needs to be undertaken to ensure the right mortgage product and lender is selected to meet your personal circumstances.
Whilst it is generally well understood that the days of making a ‘quick profit’ from buy to let “BTL” are over, for seasoned landlords and well-advised new landlords who take a long-term view, the current market conditions could provide an opportunity to make new acquisitions. With rents rising significantly and property prices stagnating/falling, opportunistic acquisitions may emerge. How do potential buyers take advantage?
Despite the increase in the Base Rate to 5% by the Bank of England in June, speculation remains as to when the next rate rise will come and where rates will peak. With the expectation that UK inflation will remain stubbornly high for longer, some experts are forecasting rates to reach as high as 7% and remain higher for longer than was anticipated earlier this year. In this uncertain climate, mortgage lenders continue to withdraw and re-issue mortgage products at short notice.
Whether you have a single buy to let (BTL) or are a portfolio landlord, if you are considering a new purchase or refinancing an existing BTL mortgage, then each lenders’ Interest Coverage Ratio (ICR) requirements/policies will be crucial to your success.
In the current times of high interest rates, lenders have set challenging ICRs and many landlords may struggle to secure the finance that they need.
In March the Equity Release Council issued their 2022 Later Life Lending report. The report highlights that in the UK, property wealth has reached £6.7trillion and £5.2trillion after mortgage debt. A significant portion of this wealth is in the hands of the over 55s. For some, the equity in their home could far exceed the value of their pension/investment savings and therefore have a significant impact on the quality of their retirement.
During the December festive holidays, many families would have gathered and spent valuable time with parents and grandparents. Often, it’s an opportunity for the older generation to reach out to children/grandchildren to offer financial support at this critical stage in their lives, when they are looking to take that first step onto the property ladder. Despite the rise in cost of living and mortgage interest rates, First Time Buyers (“FTB”) will remain crucial contributors to the housing market, however, they face two key challenges: the level of deposit and affordability.
In October, we experienced a significant level of uncertainty in the mortgage market resulting in lenders withdrawing a number of residential mortgage products.
In the immediate aftermath of the ‘mini-budget’, 5-year fixed mortgages hit rates above 6%, creating anxiety for existing borrowers who were considering refinancing options.
Since then, the combination of Rishi Sunak and Jeremy Hunt has brought some stability to the market and we are now beginning to see rates drop.
The announcement by the Chancellor, in the March budget, of a mortgage guarantee scheme was the catalyst lenders needed to start focusing again on the low deposit lending market. Some of the biggest banks in the UK have signed up to the scheme and will from April offer 95% loan-to-value (LTV) mortgages. A number of lenders have already launched low deposit mortgages without the support of the government’s scheme and there is an expectation that more lenders will follow. Increased competition should provide borrowers with more choice, greater flexibility and hopefully (eventually) more competitive interest rates.
Join us on 1st July for the 3rd in the series of ICAEW property webinars discussing the impact of COVID-19 on the mortgage market.