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The best residential mortgage rates 02.12.21
Derin Clark

Derin Clark

Online Reporter
Published: 02/12/2021

This week a number of lenders increased rates on some of their mortgage deals, including Halifax, Leeds Building Society and Lloyds Bank. Across the charts rates available on deals requiring a high level of equity or deposit are more likely to see rate rises. Saying this, mortgage rates remain highly competitive at the moment, with first-time buyers particularly seeing a more competitive market over recent weeks.

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House prices continue to rise during November

Despite signs of housing market activity cooling in recent months, figures released today show that annual house price growth increased in November to 10.0%.

The figures, released in the November Nationwide House Price Index, reveal that the average house now costs £252,687, an 0.9% increase month-on-month.

“Annual house price growth remained strong in November at 10.0%, marginally higher than the 9.9% recorded in October,” explained Robert Gardner, chief economist at Nationwide. “Prices rose 0.9% in month-on-month terms, after taking account of seasonal effects. As a result, house prices are now almost 15% above the level prevailing in March last year when the pandemic struck the UK.

“There have been some signs of cooling in housing market activity in recent months. For example, the number of housing transactions were down almost 30% year-on-year in October. But this was almost inevitable, given the expiry of the Stamp Duty holiday at the end of September, which gave buyers a strong incentive to bring forward their purchase to avoid additional tax.

“Indeed, activity has been extremely buoyant in 2021. The number of housing transactions so far this year has already exceeded the number recorded in 2020 with two months still to go and is actually tracking close to the number seen at the same stage in 2007, before the global financial crisis struck.

“Moreover, underlying activity appears to be holding up well. The number of mortgages approved for house purchases in October was still running above the 2019 monthly average. Early indications also suggest that labour market conditions remain robust, despite the furlough scheme finishing at the end of September. If this is maintained, housing market conditions may remain fairly buoyant in the coming months, especially since the market has momentum and there is scope for ongoing shifts in housing preferences, as a result of the pandemic, to continue to support activity.

“But the outlook remains uncertain, where a number of factors suggest the pace of activity may slow. It is unclear what impact the new ‘Omicron’ variant will have on the wider economy. While consumer confidence stabilised in November, sentiment remains well below the levels seen during the summer, partly as a result of a sharp increase in the cost of living. Moreover, inflation is set to rise further, probably towards 5% in the coming quarters.

“Even if economic conditions continue to improve, rising interest rates may exert a cooling influence on the market. Indeed, house price growth has been outpacing income growth by a significant margin and, as a result, housing affordability is already less favourable than was the case before the pandemic struck.”

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Help to build scheme to launch this winter

Consumers wanting to build their own home can now apply for an equity loan of up to 40% under the Government’s help to build scheme.

The scheme, which is set to accept applications this winter, is aimed at making it more affordable for consumers in England to build their own home.

It enables potential home builders to borrow between 5% to 20%, or up to 40% for those based in London, of the estimated costs to buy a plot of land and build the home, as an equity loan from the Government.

The loan will be interest-free for the first five years, but borrowers will start paying interest from year six. On year six interest will be added at a fixed rate of 1.75%. From year seven onwards, the previous year’s interest rate will increase by 2% plus either the Consumer Price Index (CPI) rate or a minimum of 2% if the CPI is zero or less.

Along with repaying the loan and interest, borrowers will be charged a £1 monthly management fee for the life of the loan.

Borrowers will have to repay the loan at the end of the term, which is normally 25 years, or when they sell the home or pay off the mortgage. Alternatively, the loan can be repaid any time before then.

Along with the equity loan, consumers will need a 5% deposit and secure a self-build mortgage for the remaining balance of up to 25%.

Under the scheme, up to £600,000 can be spend on building the new home. This must include the cost of the land, if not already purchased, and no more than £400,000 on the cost to build it.

In order to apply for a help to build loan, consumers must:

  • Be 18 years of age or over and have a right to live in England
  • Will live in the newly-built home as their only home
  • Secure a self-build mortgage from a lender registered with Help to Build.

Once the help to build loan has been approved, consumers have up to three years to buy the land and build their home.

The process for applying for the scheme is:

  • Secure a self-build mortgage, from a lender registered for help to build or through a broker.
  • Apply for help to build through Homes England
  • Successful applications will receive an equity loan offer based on the estimated cost to buy a plot of land and build the home
  • When the home is built, Homes England will pay the equity loan to the registered lender.

 

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How to fund a buy-to-let renovation

Landlords have a responsibility to ensure that their properties meet the Government’s health and safety requirements, as well as being at a good standard to attract renters.

This means that buy-to-let (BTL) properties often need refurbishing and, according to a report published by Shawbrook Bank last month, 62% of landlords have undertaken refurbishments in the last 12 months.

Of these, 18% renovated more than one of their properties.

The majority of landlords surveyed by Shawbrook Bank found themselves out of pocket paying for the refurbishments, with 60% using personal savings or investments.

Although, using personal funds to pay for revamping a BTL property may be a good option, there are alternatives for landlords looking to renovate a BTL.

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Should you consider a 40-year mortgage?

Locking into a fixed rate mortgage of 10 years or more may be tempting for those looking to secure their monthly mortgage repayments against the risk of rising rates, but long-term fixed deals may not be a good choice for mortgage borrowers.

Right now there are 333 fixed mortgages deals with terms of 10 years or more. Many of these, 161 deals in total, are available on terms that are fixed for life or term. Meanwhile, 158 deals are available on a 10 year term, eight fixed for 15 years and six deals are for a 20 year term.

Clearly, mortgage borrowers have a range of products to choose from if they want to take out a long-term fixed rate mortgage.

Although most deals are available to those with a high deposit or equity in their home some, including 40-year term deals launched by Kensington Mortgages this week, are available to first-time buyers with just a 5% deposit.

The rates on long-term fixed rate mortgages are normally higher than those on two, three and five year fixed terms. Some mortgage borrowers, however, are happy to pay a higher interest rate to have the security of knowing what their monthly mortgage repayments will be for the term of the mortgage.

Along with a fixed repayment for the length of the mortgage term, locking into a long-term mortgage can save money, as borrowers do not need to pay fees and charges remortgaging every few years.

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Recent News

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The best residential mortgage rates 25.11.21

25th November 2021

Kensington launched a range of 40 year term fixed rate mortgages this week, with some deals available to those with deposits of just 5%

Kensington launched a range of 40 year term fixed rate mortgages this week, with some deals available to those with deposits of just 5%

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The best lifetime mortgage rates available during November 2021

24th November 2021

Money unlocked from property via equity release is set to break the £4 billion this year, with homeowners taking out £2.989 billion via equity release in the first nine months of 2021

Money unlocked from property via equity release is set to break the £4 billion this year, with homeowners taking out £2.989 billion via equity release in the first nine months of 2021

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The best residential mortgage rates 19.11.21

19th November 2021

The most competitive rates that have been available over the previous few months are starting to disappear from the charts

The most competitive rates that have been available over the previous few months are starting to disappear from the charts

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Base rate rise threat remains – what to do if you’re on a variable rate mortgage

17th November 2021

The Bank of England continues to send signals that base rate may rise before the end of this year, which, if it does take place, will likely start impacting variable rate mortgages within weeks

The Bank of England continues to send signals that base rate may rise before the end of this year, which, if it does take place, will likely start impacting variable rate mortgages within weeks

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Most Popular Mortgage News

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How to fund a buy-to-let renovation

30th November 2021

Landlords have a responsibility to ensure that their properties meet the Government’s health and safety requirements, as well as being at a good standard to attract renters

Landlords have a responsibility to ensure that their properties meet the Government’s health and safety requirements, as well as being at a good standard to attract renters

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Two and five year mortgage rates hit historic lows

11th May 2020

Although the number of mortgage deals have almost halved since March, the average mortgage rates on two and five-year fixed deals have hit historic lows

Although the number of mortgage deals have almost halved since March, the average mortgage rates on two and five-year fixed deals have hit historic lows

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Should you consider a 40-year mortgage?

25th November 2021

Locking into a fixed rate mortgage of 10 years or more may be tempting for those looking to secure their monthly mortgage repayments against the risk of rising rates

Locking into a fixed rate mortgage of 10 years or more may be tempting for those looking to secure their monthly mortgage repayments against the risk of rising rates

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Government announces launch of new Help to Buy scheme

17th November 2020

The Government is set to replace the existing Help to Buy Equity Loan scheme with a new scheme that is restricted to first-time buyers only and introduces regional price limits

The Government is set to replace the existing Help to Buy Equity Loan scheme with a new scheme that is restricted to first-time buyers only and introduces regional price limits

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