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.
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