>>UK mortgage trend over the last decade

UK mortgage trend over the last decade

Post-2008, the number of mortgages being underwritten dropped dramatically as banks reeled for the global financial crisis. Banks, as well as regulators, instigated tighter lending criteria as part of efforts to stabilise both themselves and the banking and housing sectors in general. In fact, regulation to shore up the residential mortgage lending industry is still being passed right up to 2015. 9

As markets have freed up and banks have recovered from the brink of extinction, the number of mortgages underwritten have cautiously continued to rise.1

Within the homeowner market, most segments have grown steadily since the crisis with mortgages to first-time buyers showing the greatest positive increase as they take advantage of government schemes and incentives (Chart A).

The buy-to-let market experienced a similar trend over the last decade however the 3% second home Stamp Duty Land Tax (SDLT) charges reversed the industry trend back to 2012 levels (Chart B).

Homeowner mortgages (Chart A) 8                       Buy-to-let mortgages (Chart B) 8

                      

With Bank of England interest rates remaining at historic lows, residential mortgages are now cheaper than at any point over the last 12 months with average two-year fixed rates dropping to 2.208% this month compared with 2.437% last September. 4 5 6 7

Mortgage rates vary depending on loan-to-value (LTV) values with the majority of deals in the 71-80% bracket offering the best rates (Chart C). First-time buyers (FTBs) with small deposits have also benefitted from the current low-interest rate environment, as 90% LTV mortgage rates have fallen over recent years and the available deals on the market have grown (Chart D). 8

With hints from the Bank of England about a possible interest rate hike, remortgaging is on the rise too as homeowners try to make the most of the low-interest rate deals. The number of homeowners remortgaging reached 36,800 in July this year, up 10% on the year. 2

        

Buy to let mortgages over the last year

Buy-to-let landlords have faced sweeping tax changes over the last couple of years including the punitive SDLT charges on second properties coming in April 2016. This has resulted in a marked drop in BTL purchases despite rates being so low (Chart E). Upcoming tighter lending regulation from October for landlords with four or more properties is expected to further decrease the activity in the Buy-to-let mortgage market.

Buy-to-let remortgage activity had been growing until very recently but the number of loans made over the last 12 months has been lower compared with the 12 months preceding it. Tax changes that came into effect in April 2017 are likely to restrict the ability or willingness of landlords to re-leverage their portfolios. 3

Conclusion

The Bank of England is discussing potential interest rate rises in coming months and house prices are slowing for most areas of the UK. A new mortgage made under these conditions would lock-in an interest rate at historically lows.*

*This statement is not meant as advice. Note that all mortgages carry a risk and should be discussed with a mortgage advisor.

Sources

  1. http://www.which.co.uk/news/2017/09/buy-to-let-mortgage-deals-up-30-on-last-year/
  2. https://www.thetimes.co.uk/article/remortgaging-on-the-rise-to-make-most-of-low-rates-32277nzdx
  3. https://www.cml.org.uk/news/news-and-views/market-commentary-september-2017/?utm_source=UK%20Finance%20email%20alerts&utm_medium=email&utm_campaign=UK%20Finance%20mortgage%20news%20alerts
  4. http://www.which.co.uk/news/2017/09/mortgage-rates-hit-historic-low-are-you-better-off/
  5. http://www.which.co.uk/news/2017/09/two-weeks-until-landlords-face-buy-to-let-clampdown/
  6. http://www.telegraph.co.uk/investing/buy-to-let/buy-to-let-lending-squeeze-banks-wont-lend/
  7. https://moneyfacts.co.uk/news/mortgages/record-number-of-two-year-90-ltv-mortgages/
  8. https://www.cml.org.uk/news/press-releases/remortgaging-strengthens-in-july/

Always seek independent advice. This blog has not been approved as a financial promotion by Cogress Limited. We are not responsible for the content of external websites. Potential investors must rely on their own due diligence prior to investing.

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Daniel Levene2017-09-29T14:20:33+00:00