UK mortgage market expected to hold its own in 2018


Despite the mortgage market taking a slight dip in November due to a fall in house purchases, the start of 2018 is looking fairly buoyant.

The Autumn Budget paved the way for an anticipated increase in first time buyers looking for a mortgage and existing owners remortgaging. Importantly, the 0.25% base rate increase by the Bank of England hasn’t significantly impacted the availability of low rate deals for residential mortgages, and some independent lenders are offering more attractive rates on buy-to-let mortgages, too. All things considered, the mortgage market is holding its own as we enter a new year.

With another base rate increase of 0.25% predicted in late spring, expectations were that homeowners would hold off making key financial decisions. However, following the November 2017 hike, Bank of England governor Mark Carney did say that the move was not part of a sustained trend. Having adjusted to the new base rate and mortgage environment, it is likely that, for many borrowers, an additional 0.25% will largely go unnoticed, adding around £22 per month to an average £175,000 tracker mortgage.

Incentives to remortgage

Money Facts is predicting increased momentum in remortgaging activity over the next few months. Fixed rate mortgages have been rising since before the base rate hike and standard variable rates (SVRs) have followed suit. Historically, rising SVRs have resulted in more borrowers remortgaging as they come to the end of their fixed terms. Borrowers coming out of a 2016 average fixed rate of 2.56%, to a SVR of 4.74%, will be keen to move to a new two-year fixed rate offer of 2.35% (average) and the benefit of a 0.21% rate cut.

But it’s not just fixed rate mortgages offering the best deals. In response to customer demand for variable rate mortgages, Accord Mortgages (part of the Yorkshire Building Society Group) is launching three new discounted SVR deals this month.

David Robinson, national intermediary sales manager at Accord, said: “We recently reduced our standard variable rate by 0.35%, so it feels fitting to launch new mortgages that are linked to it. Whilst there was a minimal increase to the Bank Rate in November, this doesn’t appear to have quashed the appetite for variable rate mortgages.”

Lower rates for first-time buyers  

Boosted by the changes to stamp duty and falling mortgage rates, the number of first-time buyers with small deposits is expected to increase this year. Money Facts data shows that average rates for buyers with deposits of 5 or 10% have mainly fallen over the past year and were unaffected by the base rate increase in November.

Both Yorkshire Building Society and Virgin Money have cut their rates offering reduced two-year fixes, with cashback, for first-timer buyers holding a 5% deposit, bolstering the opportunities for first-timers to get on the property ladder.

Five-year buy-to-let mortgage deals

While there has been little good news for landlords recently, the buy-to-let mortgage market is offering some solace. Five-year buy-to-let mortgages are at the cheapest they have ever been, with Barclays and Virgin both offering fixes at 2.17%. For landlords looking for certainty, this could be the answer you’re looking for.

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UK mortgage market expected to hold its own in 2018

UK mortgage market expected to hold its own in 2018


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