Mortgage News

A report on the Government-backed Help to Buy Equity Loan scheme has been published by the National Audit Office.

In the report it was revealed that two-fifths (37%) of buyers would not have been able to purchase a property without the support of Help to Buy, which it estimates to have led to around 78,000 additional sales of new-build properties since the scheme started. In addition to this, the scheme has helped younger buyers onto the property ladder, as 63% of first-time buyers were aged 34 and under.

While 81% of Help to Buy loans were provided to first-time buyers, the scheme was intentionally set up to be accessible to a wide range of property buyers. As a result, homeowners were able to use the scheme to purchase a larger or more expensive property, which resulted in 19% of buyers who previously owned a property using the scheme to buy, on average, more expensive properties than first-time buyers.

Furthermore, 31% of buyers said that they could have purchased the property they wanted without the scheme, which the report estimates to have led to 65,000 households using the scheme who could have purchased the house they wanted without it. In addition to this, over the whole scheme, 10% of buyers had household incomes over £80,000 (or over £90,000 in London).

According to the report, 5% of buyers were in arrears who bought in the first 11 months of the scheme, which is above the national average as according to figures from UK Finance, in the first three months of 2019, 2.5% of homeowners were in mortgage arrears. These homeowners may find themselves in difficult circumstances as the report states that buyers who want to sell their property soon after they have purchased it might find themselves in negative equity, mainly due to the fact that new builds typically cost 15-20% more than an equivalent ‘second-hand’ property.

The news that a cross party group of MPs has launched an inquiry into the plight of mortgage prisoners has brought hope to many of those ordinary people trapped in their current deal.

The problem of mortgage prisoners has its roots in the global financial crash of 2008. Prior to this point lenders had a more relaxed approach to checking that customers could afford the mortgages being offered. Following the banking crisis, the Financial Conduct Authority (FCA) made these regulations much more stringent, with the aim of preventing borrowers obtaining mortgages which they couldn’t afford.

While these tougher rules have worked to prevent consumers from over-reaching themselves on their mortgage commitments, it has left many thousands in the trap of being unable to obtain a new remortgage deal – even though they might well have had no problems with their mortgage repayments and are in good standing with their lender. Being unable to move to a new deal because they cannot pass the new affordability checks leaves those affected stuck on a higher standard variable rate (SVR) paying potentially thousands more per year.

However, the good news is that last week the All-Party Parliamentary Group (APPG) on Mortgage Prisoners submitted a cross-party motion designed to begin scrutinising what can be done to assist those trapped on higher rate mortgages. It is hoped that by stepping up pressure on both the FCA and the Treasury some people in the UK can be freed from their current mortgage prisons.

If you are a mortgage prisoner the APPG is interested in hearing your story, please email them at APPGmortgageprisoners@gmail.com . If you need help to remortgage please speak to our preferred mortgage broker for advice.

Product competition in the buy-to-let (BTL) market has increased significantly and is at its highest level since the beginnings of the financial crisis in October 2007, data from the Moneyfacts UK Mortgage Trends Treasury Report will show.

The report, which is not yet published, shows that there are currently 2,396 BTL products available, which is the most competitive the market has been since 3,305 products were available in October 2007. In addition to this, since June 2018 competition has intensified, with the number of products available increasing by 21%, while in the past month alone it has risen by 143 products, from 2,253 to 2,396.

Despite the increase in competition, the average BTL mortgage rates have risen over the past 12 months, with the average two-year BTL fixed rate mortgage increasing by 0.17% from 2.88% in June 2018 to 3.05% this month, while the average five-year BTL fixed rate has risen by 0.11% to 3.54%, compared to 3.43% in June 2018. Saying this, both rates are still significantly lower than in October 2007, when the average two-year BTL fixed rate stood at 6.36% and its five-year counterpart stood at 6.39%.

Darren Cook, finance expert at Moneyfacts, said: “The BTL market has experienced a number of regulatory changes during recent years, however, it seems that product competition within this specialised mortgage area is continuing to grow. A 21% increase in availability to 2,396 products over the past 12 months indicates that providers are keen to offer potential BTL investors plenty of choice within the sector.

“Despite this increasing competition in terms of the total number of products available over the past year, average rates have unfortunately not fallen, and have instead followed suit, with the average two-year fixed rate increasing by 0.17% to 3.05% and the average five-year fixed rate increasing by 0.11% to 3.54% over the same period.

“The largest concentration of BTL product choice can be found at the maximum 75% loan-to-value (LTV) tier, where there are currently 352 (44%) two-year fixed rate products available and 374 (48%) five-year fixed rate products available. Coincidently, the average fixed rates at the 75% LTV tier for the two and five-year sectors are currently 3.05% and 3.55% respectively, equalling or near-equalling the average rates for both terms across all tiers.

“The increase in the BTL average rates contrasts with the downward trajectory of their residential mortgage counterparts, where product competition seems to have instead resulted in rates falling. This disparity in trends is likely to be attributed to the different approach lenders take to risk between these two sectors, and that economic uncertainty may be having a more adverse influence on the BTL mortgage market than it is having on the residential mortgage market.”

Residential mortgage market data from Moneyfacts.co.uk revealed that the gap between two-year and five-year fixed rate mortgages is at its lowest difference in seven years. For borrowers, this means that they will not be paying a significantly higher rate for the security of locking their mortgage into a longer, five-year term.