Overview of the mortgage market
Without getting too technical, over Christmas gilt yields and swap rates reduced dramatically. As a result we are starting to see some rates reduce. Woolwich are actually offering a 2.99% 10 year fixed rate which is the cheapest ever fixed rate to date. It is quite difficult to see exactly where interest rates are going to go in the future but a fixed rate below 3% is a very good deal indeed. To qualify for this deal you will have to have 40% equity or deposit. You would also have to be confident that you are going to remain in your property for 10 years and not look to re mortgage within the term, there is a porting option but it has a certain criteria. A 10 year fixed rate would be very handy for allowing you to budget efficiently for the next 10 years and would also allow you the comfort of not really having to worry about interest rate rises over the next 10 years which would be nice for some. It is quite unlikely that we will see a lower fixed rate than this unless competitors try to reduce it by 0.01 or so. There are also some 5 year fixed rates under 2.5% which again highlights the drops in wholesale lending costs.
We also have a low inflation environment which means that any increase in interest rate rise expectations are being pushed further out. These factors combined means that we are likely to continue to see low rates for a few months to come.
On the other side of the coin the mortgage market review last year made lenders tighten their criteria. Some of this criteria needs to relax a little, not over night but in a sensible manner. More scrutiny is being put on affordability, lending over state pension, self employed applications and interest only mortgages. Over time as the market becomes more competitive we should see lenders start to shift their criteria so that they can increase their amounts of mortgage business. The FCA are currently reviewing lenders policies and I’m sure that after the results of this we will see lenders move their criteria accordingly.
I’m sure we will see more lenders enter the market this year and we will see more innovative products enter the market, more niche products with lenders focusing on their target audiences.
Overall I think that 2015 will be an optimistic year for the mortgage market. There are plenty of good rates around for all loan to values, there is more competition between lenders which ultimately means that there is more choice for the consumer. Yes there is a bit more paperwork required but this is often for good reason so that the lenders can lend prudently and to ensure that you are not over stretched. The changes of the mortgage market review have now been implemented and have now settled in, it is now time to resume to business as usual which is great with some excellent rates on offer.