Private Finance Mortgage Memo

is our take on what is currently happening in the mortgage market. Our views
are often cited in several national publications, including; The Times,
Telegraph, Financial Times, FT Adviser and Daily Mail, as well as a number of
key trade publications, so this should keep you ahead of the curve. If you have
any questions on any of these stories, or would like further information,
please do not hesitate to get in touch.

  • Fixed rates reduce since base rate decision
  • New year, new … housing market – Will decreased purchase demand settle service levels and encourage lower rates in 2023?
  • Paragon brings market leading (for their space) 5-year fixed buy-to-let mortgage to market

Fixed rates reduce since base rate decision

As we predicted last week, we have seen several lenders reducing their fixed rates following the increase in the base rate last Thursday. A few examples include Halifax, HSBC, Barclays, NatWest, MPowered and Virgin have all reduced rates since.

Prior to the base rate announcement, we had already witnessed some rate reductions in fixed rates by lenders, including Nationwide, HSBC, Platform (co-op) and Virgin, especially on the longer-term products. We hope this direction of fixed rates pricing will put some borrower’s minds at ease, as this activity from lenders suggests that a certain level of base rate increase has already been factored into the pricing of fixed mortgage rates.

What will happen to fixed rates now?

The Bank of England’s chief economist, Huw Pill, has announced they will raise interest rates again to avoid the risk of a “self-sustained” inflationary cycle. The direction of mortgage rates will depend on the extent of the base rate rise, direction of swap rates (which appear to be calming down still), if lenders feel they are pricing their products too high or low nearer to the next MPC decision, and lender’ service levels. Lenders have already mentioned to us they could afford to lower rates at present, however pricing is more sensitive to service levels and to avoid being the most competitive in the market.

Rates are always quick to increase and slow to decrease and lenders are coming to the time of year where perhaps targets have been hit so they don’t need to be that price competitive.

New year, new … housing market – Will decreased purchase demand settle lender service levels and encourage lower rates in 2023?

In the second half of 2022, we saw an acceleration in the increases on fixed rates following the mini budget as well as lengthy lender service levels resulting from abnormally high purchase demand. Despite swap rates calming down since the chaos in the mortgage market, we have heard from certain lenders that they are cautious to lower fixed rates despite being able to afford to do so, as they seek to control business volumes and not impact these service levels further. Nevertheless, could a cooldown in the housing market and reduced purchase demand act as a reset button in the New Year?

It will depend on the state of the UK economy and housing market in general, and whether there is regained confidence for both lenders and homeowners. The direction of rates will mostly depend on the top 10 lenders who have capacity to handle larger business volumes and from there it is likely other smaller lenders would follow.

Additionally, banks will be entering the new lending year in 2023, this means fresh targets to hit so generally encourages slightly lower rates and more product innovation.

Paragon brings market leading (for their space) 5-year fixed buy-to-let mortgage to market

Earlier this week Paragon launched a market leading 5-year fixed buy-to-let mortgage product at 5.69% with a reduced ICR (rental income) calculation, offering some buy-to-let landlords a much-needed additional option for higher borrowing levels then they have had available in the last few weeks.

This product is available on single self-contained units, HMOs and multi-unit blocks for both purchases and remortgages through companies or personal names. As it is a specialist buy-to-let product, this is a great option for landlords with several properties or more complex circumstances including limited company landlords.

Despite this being the market leading 5-year fixed buy-to-let product, it is still far above where landlords have been used to regarding stress rates, and many landlords will be forced to make some tough decisions.

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