It has been a turbulent, if a little anti-climactic, week for mortgage rates this week as the Bank of England prevailed expectations and decided to keep the base rate on the same 0.5% level, rather than dropping to a record-low 0.25% as many predicted.
‘Uncertainty’ has been the word on everyone’s lips since the shock Brexit result, with many speculating a base rate drop in order to stave off fears of an economic fall-out. This caused lenders to apply extremely competitive rate cuts to their already cheap offers. However, speculation was met with a firm hand on Thursday, as no immediate change came into effect.
Now three weeks on since the vote, the general consensus across the industry is that it’s business as usual. Mortgage rates continue to be lower than ever and fears of investor demand dropping seems to have been eschewed. With the quick turnaround and subsequent introduction of a new Prime Minister and Cabinet, the future of the UK market is looking brighter.
The majority of lenders have been doing all they can to provide the necessary support and robust lending required to ensure security for borrowers; offering longer-term fixed rates at very competitive prices.
As a result, some of the best reductions since Brexit have come from the likes of Metro Bank, cutting its 5 year fixed rate residential and buy to let products. Residential mortgages under £1.5 million now start from 2.09% at 60% loan to value (LTV) or 2.59% at 80% LTV. Buy to let rates are also now available with a rate of 3.19% at 65% LTV or 3.29% at 75% LTV.
Barclays equally announced a number rate cuts this week to its 2, 3, 5 and 10 year fixes, with a rate of 2.14% now available for remortgages at 60% LTV. The lender also introduced a new selection of Rate Switch products, allowing existing customers to benefit from the lowest rates available.
Elsewhere, Norwich & Peterborough Building Society launched a trio of the lowest 3 year fixed rate mortgages currently available on the market, ranging from 65% to 85% LTV. Borrowers with a 35% deposit can now secure a 1.73% 3 year fix, or a rate of 1.92% at 75% LTV or 2.08% at 85% LTV. These all come with a £1,475 product fee and are available to both homebuyers and remortgages.
If that wasn’t all, Coventry Building Society revealed the lowest 10 year fixed rate mortgage ever recorded, with a rate of just 2.39% up to 50% LTV. This comes with a £999 product fee or is available at 2.69% with no fee. This just beat the previous lowest 10 year fix from Leeds Building Society, at 2.84% up to 65% LTV with a fee of £1,499, and TSB’s 10 year fix at 60% LTV offer with a £265 fee and 3.19% rate.
For higher LTVs, HSBC recently released the lowest 10 year fixed rate at 70% LTV on the market, with a rate of just 2.79% with no product fee, or 2.99% rate at 80% LTV.
Volatility in foreign exchange rates and a drop in the value of Sterling also caused a stir in the foreign currency mortgage space, causing Santander to reassess its calculation on exchange rates. The lender will now use the average exchange rate before Brexit to calculate foreign currency loans rather than the existing fluctuating exchange rate. The Stirling equivalent must also be discounted by 25% to allow for further currency fluctuations.
Santander is not the only lender to review its criteria, however, with Fleet Mortgages introducing a new minimum property valuation of £100,000 for Houses of Multiple Occupancy (HMOs), and will now be accepting gifted deposits. The lender also decided to withdraw some of its higher LTV products from 65% to 80% LTV, amid fears of falling property prices.
In line with this, Credit Suisse made the decision to lower its LTVs on Stirling mortgages in prime central London, from 75% to 70%. The lender cited fears of undermined confidence in buyers and property prices as the driving force behind the decision, which was thought to cause foreign investors to act cautiously. However, we believe quite the contrary. The weakening of Stirling against the Euro and US Dollar is making foreign investment in the UK cheaper and more attractive, which in turn, is believed to help prevent any large drop in property values.
Although we are yet to see a full exit plan and how the markets will be affected, the UK remains one of the strongest and most stable markets in the world. Many are still expecting further rate cuts and a base rate drop over the coming months, as low swap rates and uncertainty could potentially push fixed rates as low at 0.95%. However, this is purely down to speculation. Rest-assured, we will keep you updated on any market movement so you can stay prepared for the future.
If you would like any more information on the current market or this article, please do not hesitate to contact us. Alternatively, you can stay on top of lender activity with our regular rate updates.