Latest Mortgage News, September 2017
All the latest news, rates and need-to-knows from the mortgage world from our consumer journalist Christine Toner
September 15, 2017
A mortgage for life?
A mortgage is for life, not just for Christmas may not have the same ring to it as the famous pet campaign but lifelong loans may well be becoming a reality. In its quarterly consultation paper the Financial Conduct Authority (FCA) proposes bringing back retirement interest only mortgages which would essentially mean borrowers could have a mortgage for life and just pay the interest, with the capital repaid when they die or move into care. The move, says the regulator, will offer a solution to those borrowers stuck with interest-only mortgages approaching the end of their term who don’t want to take on an expensive equity release plan (known as a lifetime mortgage).
“Retirement interest-only mortgages have significantly different risks compared to lifetime mortgages,” says the paper. “In particular, they do not feature the roll-up of interest, meaning that consumers are not at risk of rapid equity erosion and the subsequent reduction of funds available for a bequest. Consumers are also more likely to be familiar with the product features of a mortgage involving interest payments. However, we do consider that there are some risks associated with lending with no fixed term and we are proposing to add a small number of additional requirements for the sale of these loans.” The consultation period for this proposal will last for two months. Watch this space.
In the meantime, check out our guides on mortgages for the over 50s and equity release
The long and the short of it
And while the mortgage industry may be looking towards lifelong loans it seems borrowers are certainly up for taking out mortgages for longer. According to a report in the Daily Mirror, one in four first time buyers are taking out a mortgage that will last 35 years or more.
The newspaper says 28.1% of mortgages taken out by first-time buyers in 2016 were for a term of 35 years or longer. In the first quarter of 2017 that figure has risen further to 30%, up from just 13.8% in 2006, according to figures released following a Freedom of Information to the FCA.
Confused about mortgage terms? Read our Mortgages Made Simple guide
Save a little harder for big rewards
For most people looking to buy a house raising the deposit is the biggest hurdle to get over. So there’ll be plenty of would be buyers who’ll rejoice at the news that the number 90% LTV loans on offer is approaching an all time high. Financial data firm Moneyfacts says the number of mortgage products on offer increased by 107 in September to 4,764 with 687 mortgages available at 90% LTV, up from 649 last month.
The current record for high LTV loans is just 21 products higher at 708 (which was achieved in April 2008).
We’re unlikely to see the same number of 95% mortgages that we saw before the financial crisis however as this month saw a slight downturn in the 95% LTV tier, with the number of mortgages available falling by six on a monthly basis to 270.
Rachel Springall of Moneyfacts says: “The rates on offer for those with a 10% deposit versus those with just a 5% deposit couldn’t be more different. By raising an extra 5%, borrowers will find it opens the door to more choice of cost-effective deals. As the number of deals in this market hit a post-crisis high, it’s clear to see how lenders are competing in this area, which was previously seen as a much more risky.”
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Mortgage news from earlier this month…
(published 1st September)
It’s back to school and back to business in the mortgage world. We take a look at how the housing market has fared over the summer and what’s coming up next.
Discount by name, discount by nature
First time buyers could save themselves as much as £1,000 by taking out a discounted rate mortgage instead of a fixed rate, according to new research by Moneyfacts.
Charlotte Nelson, finance expert at Moneyfacts said: “Despite the array of options available to first-time buyers, many tend to stick to fixed rate mortgages not just as they are the simplest to understand, but also because they are a great way for usually cash-strapped first time buyers to manage their money. However, as fixed rates for those at 95% LTV are on the rise, ignoring other options can be a costly mistake.
“Fixed rates for first-time buyers are going up, with the average two-year fixed rate at 95% LTV well above last year’s figure. In contrast, the average rate for discounted variable deals is still falling, and while the difference between the two rates was already clear to see in previous months, it has now risen to a whopping 0.82%.”
Read our guide on what type of mortgage you should get
A step too far?
If you’ve recently got on the housing ladder, you may feel like the battle is won, but latest research from Lloyds Bank suggest the biggest challenge is yet to come. According to the Lloyds’ Second Stepper report published this week homeowners looking to take the second step up the property ladder say it’s harder than getting on it in the first place.
The research found almost a quarter (23%) of homeowners plan on waiting until later in life to have children while 12% will have fewer children as a result of the added expense of moving up the ladder. And 13% of homeowners have had to change careers to move up in the housing market.
For those seconds steppers trying to sell their current home only 9% said they would consider lowering their asking price to attract interest while just over a fifth (21%) stated that they would look to rent their property instead and still move.
Number of buyers falls during summer months
Summer is drawing to a close and as we say goodbye to sunny days (remember, we had those two back in June?) those homeowners looking to sell up will be breathing a sigh of relief. Selling in summer has never been easy and this year has been no exception.
According to the National Association of Estate Agents the number of people looking for properties fell 10% from 384 per branch in June, compared to 347 in July as the summer lull took hold.
Mark Hayward, chief executive, NAEA Propertymark, said: “It is natural for the market to dip in the summer and then recover. We usually see a subdued July and August, and then a boom in September with an influx of new properties coming onto the market, it remains to be seen whether this year is typical. We’d also expect to see the number of house hunters increase, as buyers strive to complete sales before the winter kicks in.”
Image credit: PA