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Private Finance Mortgage Memo
This 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.
- Our insights on Rightmove’s analysis on first-time buyers
- Some 5-year fixed rates fall below 5%
Our insights on Rightmove’s analysis of first-time buyers
Recent analysis from Rightmove highlights several key insights into the changing priorities and attitudes of first-time buyers as they have had to “very quickly reassess their position” while they faced a rapidly changing housing and mortgage market amid increasing interest rates and soaring inflation. The data highlights the current priorities for first-time buyers as many would-be buyers make lifestyle changes to save for a deposit.
Our views:
Energy efficiency and EPC ratings
More first-time buyers are taking a longer-term view on their house buying decisions and considering the energy efficiency of a property to lower their energy costs, this is intelligent given the government energy cap would only financially support these buyers in the shorter term. We’ve recently seen a few examples of first-time buyers prioritising more energy efficient properties with an EPC rating above a certain level, and even reject a property because the EPC rating couldn’t be increased above a certain level due to how it was built. Perhaps this generation have had more education on what an EPC rating means and in the current energy environment, has increased as a priority. This in turn can influence the market and prices placed on better quality property.
Changing priorities
During the pandemic many buyers changed their priorities, for example ‘race for space’ and demand for outdoor spaces, yet this data suggests more first-time buyers are now more concerned with having a working space at home and a spare bedroom instead of a garden now, especially if this saves them money. First-time buyers appear to be making sacrifices to save for a deposit while they face soaring inflation.
Reduced demand
It is interesting demand has fallen by 26% compared to last year despite the beneficial changes to stamp duty for first-time buyers in the mini-budget, albeit 4% higher than 2019. With rates now higher, we wonder if this demand figure really reflects the current situation and if in fact it will lower further next time the data is released, while many wait for the storm to blow over / prices to hopefully reduce.
Some 5-year fixed rates fall below 5%
Why is this happening and what effect will this have?
After mortgage rates jumped into the 5-6% following the mini-budget, many lenders have been slowly reducing their fixed rates as the swap rate market calmed down and lenders had the capacity to do so. Following the continued trend of these fixed rate reductions, we have now started to see rates below 5% including Platform and Virgin Money (4.84% and 4.93% respectively).
This trend reflects the reduction in swap rates. We expect this trend of reducing fixed rates to continue, particularity for lenders where rates are far above where they could afford to lower these too.
Reduced fixed rates may lead to borrowers being more confident to proceed with their decisions and restore some demand in the purchase market. It will be interesting to see if clients will choose to proceed with purchases now that the rates have fallen or if they choose to wait and see if they will fall further.
