This is our take on what is currently happening in the mortgage market. Our views are often cited in several national publications, including; BBC News, The Times, Telegraph, City AM, 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.

  • Major changes to BTL criteria
  • How will the mortgage market respond to Omicron?

Major changes to BTL criteria

Two buy-to-let lenders have made significant changes to their criteria of late, increasing the LTV level they are willing to lend at. TSB have increased their max LTV to 80% and Foundation Home Loans to 85% – a very high LTV on a BTL product, with only 2 others in the market at this level and moreover they are offering the most competitive rate at this level.

  • This is a significant shift in the market and is part of a paradigm shift in the space, with many lenders relaxing their criteria and opening to 80% LTV, meaning there will be more potential borrowers able to enter to the market.
  • Often landlords will aim to maximise their borrowing and traditionally this was at the 75% maximum, but with more lenders are opening to 80% again rates will become more competitive, and we suspect we will see landlords and investors maximise their borrowing. Rates at 80 and 85% LTV are expensive and this will put many borrowers off, but with more competition there may be some downward pressure at this LTV too. Yields would need to be high to justify the rates payable, so some borrowers are happy to take advantage of these high LTV products as it may mean they can buy 2 BTLs rather than the one many investors would get with their money for example.
  • The current changes in the BTL lending market are indicative of the confidence that lenders have in this space and the scope that they believe they have for growth.  

How will the mortgage market respond to Omicron?

Recent data from UK Finance illustrated an estimated and record gross lending of £316 billion in 2021. While this is predicted to fall by 11% in 2022 to £281 billion, this should not be considered indicative of reduced demand in the mortgage market going forward, rather it highlights the extent to which the SDLT holiday drove demand and brought purchases forward. The tail end of 2022 and the first 6 months of 2023 will see a huge amount of 2-year fixed rate products come up for remortgage from borrowers who purchased in the midst of the pandemic when demand and the race for space was at its zenith and we suspect in 2022 we will see renewed city centre demand, which we are already seeing in flats across the UK. According to Rightmove, valuation requests from homeowners are 19% up on this time a year ago and this suggests there will be a lot more much needed stock come on to the market in the New Year. We believe we will see an increase in demand from borrowers now that the Bank of England has begun to raise rates to lock in savings now, rather than run the risk of waiting and the potential restrictions that could come into place linked to the Omicron variant could push more potential buyers into rural and suburban areas and continue to drive second and holiday home purchases. Ultimately, we cannot see the new variant having a detrimental effect on the market, given the resilience it has exhibited throughout the pandemic.

  • House prices continue to increase, the Nationwide House Price Index showing a 0.9% month-on-month increase in November and annual house price growth creeping back into double digits at 10%. We can see from recent changes from lenders, particularly the significant rate cuts at higher LTVs in the residential market, that there is a great deal of confidence in the housing market despite the Omicron variant potentially leading to further restrictions.
  • House price rises have put increased pressure on affordability, with price growth outpacing that of income. Despite the uncertainty the Omicron variant is the Bank of England raised the base rate by 15 bps to 0.25% in a bid to try and limit inflation, with rises of 5.1% in the 12 months to November (ONS). It is likely that there will be further rate rises in the New Year, and this coupled with the high house prices will reduce affordability and thus will likely have a cooling effect on the market. From a mortgage perspective, lenders have already factored in the rate rise with rates having increased steadily since it was suggested in October and thus, we suspect we won’t see any significant rises until around Spring. 
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