The uncertainty of Brexit has really kicked up a storm in the UK, especially within the property market. At the beginning of the year, property sales were slow. Thanks to mortgage lenders slashing their rates, things are looking good for first-time buyers. Mortgages in the UK remain competitive as the number of lenders joining in on the trend continues to rise.
Competitive UK Mortgages
To reassure first-time buyers, big-name lenders have significantly reduced their mortgage rates. More often than not, these cuts are seen in a number of different mortgage types. For loans of between 90 and 95% of the home value, rates have dropped by 0.1% and in some cases 0.2 per cent. In 2019, HSBC has reduced the rates of 31 UK mortgages. On top of this, the interest on their 10-year fixed-rate loan also dropped. Following in the footsteps of HSBC, Accord Mortgages, RBS, Atom Bank, and NatWest have all slashed their mortgage rates.
What Does This Mean?
Decreased interest rates for Mortgages UK have been seen in many, if not all, leading lenders. Because of this, the market has remained competitive. There has been a corresponding rise in buyers, who were previously uncertain on the timing. Some experts believe that these drops in mortgage interest rates are due to lenders wanting to meet targets. Most likely because they had not met their quota for the previous year.
Interest Rates Lowered By Many But Some Decide to Raise Them
However, not everyone decided to jump on the ‘lowering rates’ bandwagon. The specialist lender Paragon chose to increase rates as well as decrease their cashback amounts. Also looking to go in the opposite direction as competitors are the Mortgage Works buy-to-let lender.
There Are Two Sides To A Coin
First-time buyers were extremely happy to see that mortgage interest rates have dropped among many lenders, and rightly so. On the other hand, while rates remain low, property becomes more affordable in the eyes of a lender resulting in a vigorous propertty market. In turn, the price of property to stays relatively high.
High Demand Remains
In 2019, the market continues to have a strong demand for property. This year we should expect an increase in the number of homes up for sale. Especially since there is a high volume of new-build developments across the country that are nearing completion. The demand for property has been fairly strong for quite some time and it looks set to continue. Rental figures are reaching record highs and are estimated to continue rising as affordability is still an issue for many first-time buyers. Such a strong demand means that choice is somewhat limited in certain areas and again influences property prices.
Lenders Lower Their Criteria
In recent years mortgage lenders have toughened up on the requirements of taking out a mortgage. While this was needed to some extent, it has become increasingly difficult for first-time-buyers and particularly the younger generation to purchase their first home. In the years following to the 2008 financial crisis, lenders had attempted to correct their mistake of lending rather freely. In other words, they later realised that a majority of those they had given a mortgage to were not able to repay what they had borrowed. This then caused lenders to increase the requirements for mortgage approvals.
Some believe mortgage approval standards are simply too strict now. This is part of the reason why it is taking the younger generation a lot longer to purchase a home. More people were forced into renting as they were unable to raise a high enough deposit and weren’t in the position of living with family until they had reached their goal. Gradually though, lenders have started easing up slightly on their mortgage requirements. Admittedly not to a staggering degree, but certainly in a way that will help first-time buyers get on the ladder faster.
What Has Changed For Mortgages, UK?
With banks and lenders now realising that some changes are definitely needed, mortgages UK approvals have soared. The biggest impact in the relaxed mortgage requirements is the reduced down payments and the lower credit scores. Another change for mortgage requirements is the necessary documentation for a mortgage application. Mortgage lenders understand that there will likely be an element of debt for borrowers but they had become very strict with the acceptable figures. Understandably a higher debt-to-income ratio means that the borrower will already have tight monthly outgoings. This then results in a lower chance of being able to manage payments and financial commitments in the event of difficulties.
Adjustable-Rate Mortgages, UK
When rates for fixed-rate mortgages increase there is almost an inevitable rise in buyers opting for adjustable-rate mortgages. Looking back to last year we saw that exact scenario play out. Rates started to rise and there was an increase in adjustable-rate mortgages. There are many pros and cons to adjustable-rate mortgages but when mortgage rates are high then it could be the better option. Choosing an adjustable-rate mortgage typically means that lower monthly payments are collected for the first few years. Following that, the rate adjustment period kicks in where rates could increase. In one sense an adjustable-rate mortgage can be a bit of a gamble, but for those buying at a time when rates are already high, it can make the difference between buying and not buying.
UK mortgages are continuously changing. The requirements for approval alter depending on the nation’s circumstances and the condition of the property market. Bexit has obviously caused a level of disruption to the property market. Some UK investors have held back until there is a clear understanding of the implications behind leaving the EU. However, not all investors are watching from the sidelines. Foreign investors are snapping up UK property and are getting great value for their money. As we remain in the dark about Brexit, buyers are tired of waiting. Slowly, property sales are increasing and things are getting back on track.