Month in Mortgages: Pre-crisis positivity belies bumpy road

Not since 2007 have we seen a February with so many positive statistics about the fortunes of the UK mortgage market: the number of home purchases continues to rise at a decent lick, while swathes of rates are being reduced by lenders in a bid to attract more business.

Vital statistics

The month ended with the Bank of England projecting an increase from 70,000 mortgage approvals for home purchase in the first quarter of this year to 90,000 approvals in the second quarter, marking a return to pre-crisis levels of approvals.

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However, the Council of Mortgage Lenders was quick to slightly dampen mortgage advisers’ spirits by warning about a limited supply of abodes.

Bob Pannell, chief economist at the Council of Mortgage Lenders, said: “This would seem to imply property transactions running at an annualised rate of 1.5m or so. We think this may be over-optimistic, given the growing anecdotal reports of a shortage of prospective sellers.”

Help to Buy casts a wider net

Much was made, once again, of the Help to Buy effect on making consumers realise they can get a foot on the ladder if they desire to. Official statistics now apparently show 100,000 homebuyers have been brought back to the market by the initiative.

And the government continued to ensure Help to Buy mortgages made headlines and makes consumers visit mortgage advisers by confirming the scheme can now be used by providers of Sharia-compliant Home Purchase Plans, often referred to as ‘Islamic mortgages’.

The rules have been changed to allow banks that sell HPPs to purchase a government guarantee for them. The Islamic Bank of Britain has said it intends to offer HPPs under the scheme.

Best price

For anyone looking to buy or remortgage this month, many lenders also reduced their fixed rates in a sign of a return to pre-crisis rate cutting.

We asked Ray Boulger, senior technical manager for John Charcol, and David Hollingworth, associate director of London & Country Mortgages, which deals caught their eye this month.

According to Mr Boulger the most interesting deal launched this month was Saffron’s 3.97 per cent two-and-a-half year (to 30 November 2016) fixed rate up to 90 per cent LTV contractor mortgage.

He says this deal was a market leading fixed rate at 90 per cent loan-to-value (LTV) combined with sensible contractor underwriting criteria.

Mr Hollingworth argues Hinckley & Rugby’s new fixed rates were the most interesting deals to be launched this month.

He says: “Hinckley & Rugby offers a very good package on its two-year fixed rate of 2.99 per cent to 80 per cent LTV with no fee, free valuation and free legal work for remortgage. There are also no early repayment charges at any time.”

Hinckley & Rugby’s 95 per cent LTV deal was also highly rated by Mr Hollingworth.

But the best 95 per cent plus LTV mortgage available this month, according to Mr Boulger, was Hanley’s 95 per cent LTV two-year discount at 4.19 per cent.

He says this deal was a “fantastic rate at 95 per cent LTV after a 70 basis point rate cut, despite not being a fixed rate”.