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.

  • BTL rates on the rise
  • Significant increase in capital raising and extended borrowing for large-scale renovations
  • The continued growth in the 10-year fixed rate market

 BTL rates on the rise

Since October, when it became clear that inflation was not transitory and was in fact rising dramatically, and thus the Bank of England was going to respond with base rate increases we have seen mortgage rates in the residential sector rise on a weekly basis (in fact many more of these today too). This has been particularly prevalent in shorter terms (2, 3 and 5-year fixed) and lenders have responded by reducing longer term (10-year fixed rates). The BTL market was slow to respond as lenders had seen this as a key battleground for new customers. Until this last week, the best 2-year fixed remained at 0.99% a full 30 bps below the best 2-year fixed residential rate. Rates are now increasing across the board, they remain low, but we suspect we will see sustained rises moving forward. On the buy to let side of things we often seen lenders do ltd edition products with certain tranches of finance backing these products, however over the last few weeks we have seen some of these removed especially amongst specialist lenders so reverting their lending to more expensive rates. Either all the money behind these products has been used, or lenders were being too competitive so have had to remove them

  • Historically BTL rates were far above residential mortgage rates but that is no longer the case and even though we will see rate rises, borrowing for investment will remain competitive and given the demand in the rental sector, lending in this space is a low-risk proposition.
  • The headline rate in the BTL space is 1.09% currently, however that comes with a large 2% administration fee up-front. The next best rate is 1.34%, but with a £1,499 administration fee and this would be a better option for borrowers who qualify. This highlights how sometimes the best available rate, may not be the “best” rate for borrowers. It often is also the case that the best rates in the BTL market are merely headlines and there is little to no uptake, especially as these headline rates are 2-year fixed rates where most landlords take 5-year fixed rates to enhance their borrowing capacity on the property.

 Significant increase in capital raising and extended borrowing for large-scale renovations

We have seen an increasing number of clients capital raise on existing properties or remortgage with increased borrowing to fund extensive renovations and extensions in recent weeks. We have also seen this trend emerge in the purchase market, with buyers unable to necessarily find their ideal home, buying property with scope for extension or redevelopment and borrowing at a far higher LTV than necessary to retain cash for this purpose has become a lot come common too.

  • This comes as no surprise given the much-discussed lack of supply in the housing market and we suspect this will continue going forward.
  • We are seeing those who hoped to move during the pandemic being fed up with their inability to find somewhere new and deciding to stay put and large-scale renovations and this will further limit supply in the market moving forward.
  • This is going to keep the building industry very busy over the next couple of years, however we do hope borrowers are considering the real cost of works these days as they have risen significantly over the last couple of years.

 The continued growth in the 10-year fixed rate market

Astonishingly all that now separates the best available rate in the 3 and 5-year fixed from the 10-year fixed is 0.09% (9 BPS). This is unprecedented in the mortgage market and marks a significant shift from lenders in trying to attract borrowers on to longer terms. Given the fact interest rate environment has seen a paradigm shift, where for the first time in many years borrowers will face a higher rate when they come to remortgage it makes increasing sense for borrowers, if it suits their personal circumstances to opt for a longer term and it is possible that the base rate could be higher than their actual mortgage rate within a 10-year term given the current trajectory and inflationary pressures on the economy. We are now seeing this pivot in the BTL market with LendInvest recently launching a very competitive 10-year product. These products did exist before, but not from as specialist as a BTL lender as LendInvest for some investors it could make sense to lock in for a longer term if circumstances allow.

  • We have had a significant increase in interest from clients about 10-year products both residential and BTL and we suspect the market will begin to move towards longer terms across the board. The fact these rates are so competitive also makes borrowers who are considering shorter terms initially meet in the middle and opt for 5-year fixed terms.
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