25 November 2021

What’s happening with mortgages right now and what opportunities are there for landlords, first-time buyers and investors?

The frenetic housing market of the past 18 months has been well-documented, with buyers chasing more space, both inside and out, as a knock-on effect of the pandemic. The stamp duty holiday has helped fuel activity, along with record low mortgage rates. With increasing speculation regarding an interest rate rise, borrowers will be wondering what impact this could have on mortgage pricing.

Indeed, the markets have already priced in a base rate rise, if not at the December meeting, then in February when the Monetary Policy Committee meets again. This has resulted in lenders pulling some of their cheapest mortgage rates, particularly those aimed at borrowers with a 40 per cent deposit and repricing them upwards. Meanwhile, rates on higher loan-to-value (LTV) mortgages continue to fall, which is good news for first-time buyers. Indeed, the pricing of 95 per cent LTV mortgages is lower now than it was in 2019.

With one lender launching a 40-year fixed-rate mortgage, borrowers may be wondering how long they should fix for. Long-term fixes are competitively priced but early repayment charges must be considered, with some of the longer products carrying onerous ERCs which can run into tens of thousands of pounds. If you can’t afford to be wrong – that is, if interest rates were to rise, you would struggle to pay your mortgage, then a fixed rate makes sense but it is important not to fix for longer than you are absolutely sure about. As always, it is worth seeking advice from a whole-of-market broker to find the best deal for your circumstances.

Buy-to-let mortgage rates remain extremely competitive, with a number of lenders cutting rates recently. Some lenders have also eased criteria, scrapping minimum income requirements, raising LTVs and opening up lending to first-time buyer landlords, so there is more choice and flexibility on offer. There is also more choice of holiday let mortgages for those investors keen to take advantage of the growth in popularity of staycations by purchasing a holiday home in the UK.

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