Borrowers seek to minimise outgoings amid Covid-19 outbreak
Mortgage market activity was at a four-year high in January, according to Bank of England data. The market is likely to remain busy over the coming months, though there will unquestionably be shifts in types of lending carried out as the effects of Covid-19 begin to take hold and borrowers seek to minimise their outgoings amid the prevailing economic uncertainty.
Borrowing for house purchase, which accounted for a little more than half of total lending against residential property before the outbreak, is likely to be suppressed while government advice on social distancing remains in place. Fewer would-be buyers are viewing properties, and many valuers are restricted to carrying out desktop valuations.
The outlook is different for remortgaging. Approvals hit 52,112 in January, the most since August 2018. Competition among the high street lenders has been particularly intense over the past twelve months and there are now almost 10,000 products aimed at borrowers seeking to remortgage, an increase of 7.4% in a year.
Emergency rate cut
On Thursday, the Bank of England cut the base rate to an historic low of 0.1%, its second emergency rate cut in a matter of days. Activity surged as borrowers sought out tracker mortgages. There’s also been significant interest in accessing three-month mortgage payment holidays, with reports emerging of long waiting times to contact lenders by phone while resources are stretched.
Many banks have introduced dedicated website sections that allow mortgage holiday applications. We have answered your frequently asked questions here.
The response to successive rate cuts among lenders is unlikely to be uniform while many are under financial pressure amid the spread of Covid-19, as our managing partner Simon Gammon told the Evening Standard. Pricing of deals will vary among banks with different appetites to lend.
Draw down and equity release
The volatility in markets has ramifications for older people approaching retirement, who have experienced increasing pension losses amid the outbreak. The popularity of pension pot draw-down has surged in recent years, and data from the FCA indicates 190,971 pension plans entered drawdown in 2018/19, up 14% on the same period two years earlier.
The deteriorating prospects for alternative investment choices (equities, commodities and bonds) has highlighted the stability of property, and for may older people Equity Release will become increasingly appealing.
Later Life Finance, once regarded as niche, is now mainstream. Older homeowners withdrew £3.92 billion of housing equity during 2019, a four-fold increase on the £946 million taken out a decade earlier, according to Equity Release Council data.
Visit our Equity Release page to find out how we can help you.