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Market Commentary: Mortgages March 2020

The Bank of England (BOE) monetary policy committee voted unanimously to cut the base rate from 0.75% to 0.25% and now to 0.1%, reducing UK borrowing costs to the lowest level in history.

The mortgage market remains competitive. A few schemes which remain and are worth noting:

  • 2 year fixed at 60% LTV – 1.19% pa, with a lender’s arrangement fee of £995.
  • 2-year fixed offset at 60% LTV – 1.25% pa, with a lender’s arrangement fee of £999
  • 5 year Fixed at 60% LTV – 1.44%pa with a lender’s arrangement fee of £995
  • Buy-to-let 2 year fixed rate at 60% LTV 1.29%pa with a lender’s arrangement fee of £1,995
    *LTV = loan to value

The latest Halifax index revealed that annual house price growth slipped back to 2.8% in February from 4.1% in January, amid warnings about the likely impact of coronavirus on the market.

Gross mortgage lending dipped for the first time in almost a decade last year, annual figures from UK Finance have shown. The total number of mortgages advanced over the year excluding internal product transfers was down, which is the first annual decline since 2010. The re-mortgage sector is shrinking; UK Finance noted that the prevalence of 5 year fixed rates was starting to curb re-mortgage activity, although the drop in external switching was more than compensated by the increase in product transfers.

The latest figures from Moneyfacts show that mortgage swap rates have almost halved since the start of the year, but lenders have passed on just a fraction of this cut,: two year swaps plunged from 0.89% to 0.49% between January and March whilst five year swaps fell from 0.9% to 0.5% over the same time frame. Money Facts believe that the falling swap rates are fuelled by speculation and sentiment on economic factors and provides us an indication of market expectations for  interest rates or the cost of borrowing over a specific future period of time.

Rates for buy-to lets have continued to fall, according to the latest Property Master report. Angus Stewart, Chief Executive for Property Master, said that the news would be a lifeline for hard pressed landlords impacted by regulatory and tax changes. This news on the cost of borrowing will be a boost for the landlords as yet another raft of regulatory and tax changes is set to bite. From 20 March 2020 , the Homes (Fit for Human Habitation) Act comes into place and from April all landlords will need to demonstrate that all their properties have at least an E energy rating or face substantial fines.

The above content does not represent a personal recommendation. If you have any questions on the buy-to-let sector reforms, rates or the mortgage market in general, our mortgage team is here to help. Please contact the team on 020 7444 4030 or by  email.

Your home is at risk of repossession if you do not maintain mortgage payments.