Rate changes, criteria amendments and changes to regulation. What is in store for borrowers for the rest of 2017? Beckie tells it how she sees it for home-buyers and movers.
Well, where did Q3 2017 go? We saw a flurry of criteria and rate changes and lots of borrowers asking if the new underwriting rules on buy to let might affect residential borrowing. And now we are hurtling towards Christmas with the Governor of Bank of England hinting at a possible rise in interest rates before the end of the year.
Borrowing 5.5 times income is gone
The first thing that springs to mind is that Accord Mortgages has changed its affordability model. It was one of only a couple of lenders which would lend more than five times income; to be precise, for a long while it offered 5.5 times income to certain applicants. Some of you will be disappointed to hear that this income multiple is no longer available; however, I think what has been introduced instead is generally better.
It will now consider lending up to five times income on borrowing up to 95% loan to value including lending to first time buyers AND those looking to borrow in excess of £500k. In the past, lenders have tended to restrict income multiples on larger loans to 4-4.5 times income max, so this is a positive step for those looking for larger loans with larger incomes.
Speaking of Accord, as much as it hasn’t always been my favourite lender, I am warming to them! Recently, it released a stunning two-year fixed rate at just 0.99% (4.7% APRC), available up to 80% LTV with a free valuation for purchases and remortgages - and an arrangement fee of £1,495. Now, this mortgage was withdrawn 10 days later but is a good sign that competition in the market is still hot!
Five year fixed rates rising
Having said that, in the last few days we have seen several lenders including Barclays and Nationwide increase their pricing. This may be a sign that the record low interest rates may slowly disappear and be replaced with higher rates going forward. I can only assume that the current uncertainty over how long it will be before the Monetary Policy Committee votes to raise Bank Rate, is making lenders nervous. That, and of course, three-month LIBOR is on the rise.
So, we are again recommending that borrowers consider locking in a five-year fixed rate NOW. As I write, there is a five-year fixed rate available at just 1.65% (3.1% APRC) with a £999 lender fee up to 60% LTV. It comes with a free valuation and free legals so makes sense on all fronts. I don’t think it will be around for long and I don’t think it will be long before all five-year fixed rates are over 1.7% and ultimately will settle above 2%. With lenders’ mortgage offers being valid for 3-6 months you can apply now and wait to complete if you have penalties into early 2018. Do get in touch if this is of interest.
In buy to let world, October saw the introduction of specialist underwriting on applications from portfolio landlords, (i.e. landlords with four or more mortgaged buy to let properties). I have been asked a lot if this new approach will affect residential homeowner mortgages. The short answer as far as I can see at this early stage is, it won’t. There are several lenders, Virgin being the biggest, which won’t lend to portfolio landlords on a buy to let basis at all, but WILL lend on a residential basis even if the landlord has 100 buy to lets – so the four or more rule isn’t a deal-breaker. Don’t get me wrong, not all residential lenders will lend if you have four or more mortgaged rental properties but that has always been the case – the PRA changes have not ruled out any lenders that used to lend to professional landlords – they still do.
With a market as fast paced as this, please do give us a call to chat through any residential mortgage needs you have – we pride ourselves on staying ahead of the game and keeping our knowledge up to date so truly believe if it can be done, we can do it.
You can call me directly on 01732 471602 or request a call back from one of our team here.