The election is now fading into the distance and we can concentrate on the future! I am pleased there is to remain a level of continuity for our sector as it has been a very positive few months in our market and we need that to continue. Funding is on the increase, competition is rife and rates are at their lowest for some time, with no immediate sign of any increase. The remortgage market is buoyant and many are taking advantage of the lenders need to attract new business with many lenders offering free valuations and free legal costs.
However, the main issue is still that demand for new houses outweighs the numbers being built and this will be the Governments biggest and immediate headache, along with possible lack of materials and manpower. Time will tell.
The other issues tend to be around lender affordability. Difficult to detail when I have minimal words, but in the main, lenders will stress test all mortgages against a possible rate rise and underwrite the customers based on their ability to pay at the higher rates. The regulators want lenders to ensure the customer can afford their mortgage for at least the next five years. So, for example, a shorter term deal may be stress tested at a pay rate of 3% plus 3 percentage points higher than the prevailing rate at origination, so in this case 6%. Whereas a five year (or longer) deal may be stress tested against the pay rate, which might only be 3 or 4% in current climates. This can make quite a difference when it comes to calculating the affordable loan amount over the first five years of the loan, subject to the lenders terms and conditions.
Longer term fixed rates can be good for the end consumer as they should get the loan they want, but also the monthly payments remain fixed for the next five or more years.
There are a number of attractive five year deals, some six and also ten year deals currently available. Potentially great value if you know your plans for the longer term and prefer to fix your monthly payments.