Borrowers can access rock bottom mortgage rates as lenders battle for market share
As risk-averse lenders battle for business, borrowers with deposits of 40% of a property’s value or more are spoilt for choice, says Hina Bhudia, Partner at Knight Frank Finance.
In the weeks since the reopening of the property market it has become clear that pre-pandemic conditions will take some time to return.
Lenders are making a herculean effort to clear a backlog of mortgage applications built up while surveyors couldn’t access borrowers’ homes in-person. They must also manage their own staff in the new remote working world we find ourselves in, all the while grappling with the continued closure of many international call centres in locations battling to control the spread of the virus.
That’s not to say conditions haven’t improved dramatically since the low point in April and May. ESIS volumes, a proxy for mortgage market activity, are now just 10% below pre-pandemic levels, according to lending technology company Mortgage Brain. At LTVs below 80%, they’ve already surpassed pre-pandemic levels.
That’s because banks are competing for borrowers with larger deposits as they seek to re-establish a pipeline of business by offering rates at or close to the lowest we’ve ever seen.
Borrowers can now access 2 year fixed rates of 1.09% and 5 year fixed rates of 1.38% at 60% LTV on loans up to £10 million.
The flip side is the market continues to be challenging for first time buyers, the self-employed and anybody who relies heavily on bonuses or commission to top up their income as banks have become particularly risk averse ahead of the wind up of government support schemes in the Autumn.
If chancellor Rishi Sunak lifts the threshold at which people start paying stamp duty from £125,000 to as much as £500,000 later today, as trailed in the newspapers, that will provide some welcome respite, but it remains particularly important that applications are put together carefully.
If we do see that threshold raised, that will likely initiate a new wave of applications for banks still working their way through the backlog built up over the course of the lockdown. That could impact the time it takes to obtain approvals for all borrowers, so if you’d like to discuss your borrowing, please get in touch.