Equity Rich Mortgage Applicants Enjoying Great Rates
While the end of November and start of December has seen a welcome increase in the number of 90% mortgage deals on offer in the market, it is fair to say that this is an area of the market that has been badly underserved since March.
95% mortgages are virtually non-existent, and in the middle of November 2020, Moneyfacts stated there were only 56 fixed and variable rate products at the 90% level. In March 2020, there were 779.
Many mortgage applicants are losing out on great deals
There has also been a notable change in the average rate of interest on these mortgages. Before the lockdown, the average two-year fixes rate 90% mortgage charged 2.57% interest. Moneyfacts said, as of mid-November, the average interest rate was 3.76%.
At the lower rate of interest, the average customer would have paid £814 per month on their mortgage but at the higher rate, the average monthly mortgage payment would be £927 per month.
Homeowners who can provide a 15% deposit receive a slightly better deal, but it is far from startling. In July 2020, the average interest rate for 85% mortgages was 2.11% and in November, this rose to 3.12%.
The larger the deposit, the better your options
However, mortgage applicants who have considerable sums of money and how can afford to place a sizable deposit on their property will find they can enjoy rates which are better than they were before the pandemic.
Anyone who is able to place a 40% deposit on their property will find the average two-year fixed rate stands at 1.77%. In March 2020, the average rate was 1.8%, so people with the means to fund a large deposit are better off now when applying for a mortgage.
Chris Sykes, mortgage consultant at Private Finance, said: “Lenders are still looking to compete aggressively on the lowest risk lending propositions in the market. That means those who have mortgages, have a proven track record of making payments and own property that for most will have increased in value since purchase, at the earliest two years ago.”
With respect to the number of products available, people willing to take an 85% mortgager deposit are in a stronger position. At the last check, there were 344 deals available, which is still considerably down on the 664 prior to lockdown, but it is greater than the options afforded to people looking for a 90% mortgage.
Eleanor Williams, at Moneyfacts, has advised borrowers looking to arrange their best possible deal should speak with an independent broker or financial adviser. Eleanor said; “Financial advisers will be able to use their knowledge of the market to assist with finding the right product for their circumstances and navigating potential concerns around any possible underwriting or conveyancing delays.”
While there are new challenges to overcome in the housing market, people shouldn’t consider arranging a mortgage to be an impossible task. However, it is vital people accept help and assistance from professionals in the field. If you are keen to arrange a mortgage, speak to a mortgage broker or experienced adviser and make sure you are fully equipped to make an informed decision.