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.

  • 10-year fixed rate mortgages: The new battleground for lenders
  • Rate rises in shorter term fixed products
  • Demand remains strong despite predicted slowdown

 10-year fixed rate mortgages: The new battleground for lenders

First it was Virgin and TSB significantly reducing rates, now Halifax and Lloyds coming in at 1.66-1.68% – the lowest I’ve ever seen and potentially the lowest rate ever. We are seeing other lenders being competitive in this market too like Leeds BS and Coutts. The competition in the 10-year fixed rate market is fierce and has emerged as a key battleground for lenders. This is partly a product of the broader interest rate environment we are in. When interest rates were higher and likely to fall it made sense for consumers to lock in for a short period of time, however as we now expect consistent base rate rises for the next year and likely more, never have these products had so much appeal. We are seeing increased enquiry levels and increased interest from potential borrowers. This raises an interesting question as to whether this will change the direction of the UK mortgage market entirely and put us more in line with the US and the rest of the world, where 10, 20 and 30-year fixed rates are not uncommon. With house prices high, the cost of moving high with no reforms to SDLT coming in the foreseeable future and people leapfrogging up the ladder, a trend we recently identified, and buying their “forever homes” earlier we suspect the growth in this market will be significant this year. Moreover, because these rates create a talking point with borrowers, aside from growth in this product type we suspect we will see increased take up of 5-year products as borrowers consider longer rates but are not willing to commit to 10-year fixed. We are even seeing some of these 10-year fixed rates almost at parity with lenders 5-year offerings.

  • It is possible that within the lifetime of these 10-year fixed rate products the interest rates a borrower is paying if they take one of these today is less than the base rate itself. Banks and lenders themselves however are borrowing this money now at very cheap rates and it is preferable for them to retain a client for 10-years at 1.66% than on 2-year term at a slightly lower rate.
  • We suspect we will see increased flexibility and product innovation from lenders in this mortgage types, especially around ERCs to encourage more consumers to take these products up.

Rate rises in shorter term fixed products

With inflation at its highest level in almost 30 years and the Bank of England predicting this to rise further come April, it comes as no surprise that the base rate is likely to rise further on Thursday in an attempt to curb the spiralling costs, faced by businesses and consumers alike. Lenders are already pricing this rate rise in, in short-term residential mortgage products and since the start of the year we have seen consistent, yet small rate rises on a weekly basis in the 2-, 3- and 5-year fixed categories with the best available rates now standing at 1.29%, in the 2-year fixed and at parity in the 3- and 5-year fixed at 1.41%.

  • BTL rates remain at rock bottom, and we suspect we will see some accelerated rate rises in the coming weeks in this space.
  • We have a moved into a new lending landscape and although rates remain low in a historical sense, rates are very much rising and will do in the short and medium term.
  • It is astonishing that give the rate cuts in the 10-year fixed, the difference in interest rate between a 2 and 10-year product stands at only 0.37%…

Demand remains strong despite predicted slowdown

Despite a slowdown predicted in the mortgage and housing market in 2022, demand shows no sign of abating. According to Nationwide, the UK housing market had its strongest start to the year since 2005, with annual house price growth rising to 11.2%. This comes as no surprise with clients of ours being outbid on properties by significant sums, such as £200k on a £1.3m house and £75k on a £1.4m house and that was just today. Lots of buyers who sold in an attempt to move in the depths of the pandemic are now in fierce competition for the few houses available and having waited many months to move are increasingly keen to get the process underway.

  • Restricted supply will continue to push up house prices, but as prices reach record highs it should push some owners to put their homes on the market, especially once they see more viable properties for their next move. We suspect rising interest rates will give people a big impetus to undertake a move sooner rather than later if it is something they are planning to do. 
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