With the new Mortgage Credit Directive (MCD) coming into force next week – marking the first of many changes heading for the industry this year – the mortgage market remains in somewhat of a limbo as far as rates are concerned. Lenders have continued to tighten their criteria amidst the ongoing price war, causing borrowers to either fix their mortgage ahead of upcoming changes or sit tight until speculation turns into certainty.
Much of the movement from lenders has proved positive for borrowers, with many reducing their longer-term fixed rates and offering some of the lowest rates on record. However, hidden fees have proved a problem for some when tapping into super low fixed rates, while many wealthy borrowers have found themselves locked out of them altogether.
Despite this, lender criteria for specialist lending, such as interest only and self-employed mortgages, have seen some alterations this week with more flexible requirements now in place from the likes of Virgin Money and Kent Reliance.
Virgin Money has now halved the minimum gross income requirement for its interest only mortgages from £100,000 to £50,000, while removing the original requirement for the worth of a property to be at least £500,000. A maximum loan to income multiple of 3.5 for borrowers with both interest only and part to part deals has also been introduced to ensure stronger affordability amidst loosening criteria. As if in response to the cry for more help for the self-employed, Kent Reliance has dropped its lending requirement to just 1 year of trading, down from the previous 36 months.
The most outstanding update for mortgage rates this week came from Leeds Building Society, who now offers a 10 year fixed rate at just 2.75%. Currently the lowest offer on the market, this has proved worthy competition to TSB’s leading 10 year fix at 2.89% (released at the beginning of the month) as well as beating Halifax’s recently reduced 10 year fixed rate at 4.99%. Available for mortgages up to 65% loan to value (LTV) with a £1,499 fee, this is portable and allows for overpayments of up to 10% per year. Other 10 year fixed rates available from the lender include a 3.39% rate up to 75% LTV, 3.49% up to 80% LTV and 3.89% at 85%LTV.
Elsewhere on the market, Santander and Accord Mortgages have both been reducing fixed rates across a selection of products, tailoring new offers to those with higher LTVs. Santander has revealed a new 2 year fixed rate with an extremely competitive 1.99% rate which is to be added to its existing 85% LTV range, as well as launching 3 key account exclusives at 90% LTV. The lender’s 2 year fixed rates at 3.14% and 3.59% are also now available up to 85% and 95% LTV respectively. These are all for both purchase and remortgage applicants.
Yorkshire Building Society is another lender to have lowered its 5 year fixed rate mortgage products by up to 0.65%, now including a fee-free mortgage product available at 95% LTV with a 4.49% rate and £750 cashback on completion.
Equally, Accord Mortgages has added 75% and 80% LTV products to its 5 year fixed residential range. Available to homemovers and homebuyers with a 20% or 25% deposit, rates now stand at 2.49% for 75% LTV and 2.59% for 80% LTV. The lender has clearly been hard at work, having also discounted a selection of 2 year fixed rate remortgage deals for buy to let landlords. Available at up to 75% LTV, this includes a 2 year fix at 2.34% with a 25% deposit, 2 year fixes at 75% LTV with an £800 product fee at 2.64%, and 2.89% with free standard legal fees or £300 cashback on completion. A fee-free 2 year fix at 65% LTV now comes with a rate of 2.84%.
Despite the influx of reduced fixed rates, some lenders have also been tightening criteria in preparation for the MCD. For example, Natwest has announced it will now be lowering its loan to income ratio, meaning those with a 15- 25% deposit will now only be able to borrow up to 4.45 times their annual income (down from the previous 4.75%). Not only this, BM Solutions has upped its income checks to ensure financial stability, requiring customers applying for buy to let mortgages to now disclose their residential mortgage payments and the total gross income of the household as well. This is very much in line with the trends witnessed as a consequence of the regulator’s Mortgage Market Review in 2014, with many high net worth borrowers being exempt from the best deals on the high street (like the ones we’ve just listed) and victim to tightening criteria across the market. We discuss who this concerns and what might be done in greater depth here.
In anticipation of the MCD next week which will no doubt cause a flurry of market activity you can stay on top of the latest mortgage rates and news as it comes with our daily rate updates. This will also be the space to watch in relation to arrival of stamp duty changes in April.
In line with this, although the aforementioned rates are indicative of current market activity, private lenders will not publish their rates, and we are restricted in our ability to relay this information. Although we should emphasise the fact that their rates are often much more competitive.
If you have any questions on this week’s mortgage rate updates or market activity in general, you can contact one of our expert brokers below who will always be happy to discuss your options.