2016 Mortgage Market Summary
A Summary Of The 2016 Mortgage Market
It’s been another eventful year in the UK Mortgage market so with Christmas almost upon us I thought I’d take time to give you my reflections on some of the events that have shaped 2016.
The Government’s All-Out Attack On Landlords
For many years now the talk has been of the South-East property market over-heating and the UK Government certainly intervened in a big way this year to cool things off.Their target was the Buy to Let property investor and a series of measures has left Landlords feeling battered and bruised. First up was the introduction of a 3% Stamp Duty surcharge on additional properties, a tax-grab of £6000 on a typical purchase. There was a rush to market early in the year leading to a surge in Buy to Let applications but the market unsurprisingly cooled off over the summer. Next up, and phased in over the next 4 years, is a major change in how tax relief is applied to mortgage costs. This one is still sinking in but more and more Landlords are now setting up their own Limited companies to combat this.
My current view on this is that the professional Landlord will continue to invest in the UK property market as they view their portfolios as very much a long-term investment. The “amateur” Landlords and those looking to “Let to Buy” are become more infrequent. Successive Governments have failed to really get to grips with the shortage of affordable housing in the UK and this was largely an unexpected assault on the buy to let sector.
The big UK political story of the year has to be Brexit and whilst there were a few jitters immediately after the surprise result this seems to have had a very little effect on the property market. I’ve spoken with some clients who have decided not to move house for now until the effects are fully known but come what may, we Brits have always had an obsession with home ownership and I don’t expect that ever to change. Still, most people would prefer to buy than rent given the choice and this will continue whether we are part of the EU or not.
Brokers Beating The Banks
Over the years the split between clients arranging their mortgage direct with a Bank/Building Society or employing a Broker has always hovered around 50:50 or in other words, almost exactly half of the applicants looking for a mortgage look for a Broker to help them. The Mortgage Market Review of 2014 changed all that though and throughout 2016 the split was running at approximately 70% in favour of Brokers. There seems to be little appetite for Banks to re-expand their direct to consumer propositions (I hope!) although they have finally seemed to get to grips with the offering of customer retention products rather than the constant focus on trying to win new customers. Nationwide have got an interesting offering now, clients can go into a local branch but rather than see an Advisor in the flesh they carry out the mortgage interview by Skype with a Head Office Advisor. Our clients love us coming out to see them in the comfort of their own homes and of course, we are happy to work out-of-hours too and I don’t see the Lenders wanting to challenge us in that anytime soon.
The End Of Help To Buy
In a complete lack of imagination some years ago, when the Government needed a name for their new idea of a mortgage guarantee scheme to encourage Banks to start offering 95%mortgages again, all they could come up with was “Help to Buy – Mortgage Guarantee Scheme”, aka “Help to Buy 2”. This has been a cause of great confusion but this is set to come to an end soon as it’s coming to an end. I have to say this has been a tremendous success and has helped thousands of young first-time buyers onto the property ladder so it’s a shame to see it go. Natwest recently announced that they are going to continue offering 95%mortgages even though the scheme is ending and Halifax followed suit quickly after. Some credit here to the Conservative/Lib Dem Coalition, this one really worked out.
Record Low-Interest Rates
Borrowers continue to enjoy the lowest mortgage rates of all time and we even saw the first sub 1%mortgage in the summer. It really has never been as cheap to borrow money yet tens of thousands of mortgage-holders remain on their Lenders’ standard variable rate when they could make massive savings by shopping their mortgage around. Sometimes it’s just that they can afford it so they don’t bother remortgaging or it’s just too much hassle – that’s why you use a Broker! The Bank of England also cut the base rate to an unbelievable 0.25% (great news for tracker mortgage-holders) when ALL the “experts” were predicting a rate rise this year. Don’t listen to their predictions: Interest rate rise – WRONG, UK to remain in the EU – WRONG, Trump to lose the election – WRONG! Here’s one prediction that won’t be wrong though – interest rates will rise at some point in the future! If you are concerned about your mortgage payments increasing you should consider a fixed rate.
Finally, we have seen more so-called “Challenger” Banks and small specialist Lenders come to market in 2016. In my opinion, it is mainly these Lenders that are willing to innovate in terms of lending criteria and product offerings so a big well done to the likes of Precise Mortgages in particular but also Kensington, Aldermore, Kent Reliance and The Mortgage Lender – keep up the good work and we’ll continue to support you.
If you know anyone that is looking to move house or remortgage the biggest compliment we receive is for you to pass on our details.
Malcolm Davidson Mortgage Broker