Looking back at September; on the whole we saw some positive changes in the mortgage market.
Following the Bank of England's first base rate reduction since March 2020 in August 2024 from 5.25% to 5.00%; market confidence appeared to boost among lenders. September was a month where we started to see sub-4% interest rates emerge for some residential mortgages, and SONIA swap rates continued to fall – with 5 year swaps at 3.527% as at 25th September 2024, compared to 4.415% a year prior.
As a firm, we've seen a 62% increase in mortgage applications submitted in September 2024 compared to the same month in 2023, which indicates to me that the appetite for purchasing, or even switching mortgage rates, is strong. We've also found that the vast majority of buy to let applications at present are via Limited Companies, especially as many lenders are seeming to streamline their offering by no longer differentiating rates between personal name transactions to those via a Special Purpose Vehicle.
Interestingly, we're continuing to see purchasers from overseas investing in UK property, and request lending so as to leverage their investment. For Ex-Pats, the rates on offer today in comparison to a year or two ago are, on the whole, more favourable which further ignites property investment appetite.
We've also seen a greater appetite in the specialist lending space – namely holiday lets, House in Multiple Occupation (HMO) and Multi-Unit Freehold Block (MUFB) lending. Lenders seem to acknowledge that, post-Covid, short-term letting is still popular among investors and we've seen lenders price more aggressively in order to 'pip competitors to the post'. In the HMO space, we've witnessed some lenders become willing to offer investment valuations on properties that are heavily altered to cater for HMO needs, with as few as five bedrooms – something that previously we would typically see on very large HMOs by more commercially-minded lenders. This can also be said with MUFB lending – where some lenders have now opened this up to even first-time landlords.
Now, on to the more mainstream side of mortgage lending, where we look at residential rates. This is where we've seen the greatest changes in interest rates, for the better. September was the month where we started to see many high street lenders reduce their rates to sub-4%, more so for their longer-term fixed rates, at a reasonable loan-to-value. An example being, on the 26th September, someone moving home with a 25% deposit would potentially be able to benefit from an interest rate of 3.84%, over a five year fixed period*. In comparison, for an even lower loan-to-value of 60%, a snapshot we took on the 14th June 2024 indicated rates started from 4.28% on a five year fix – so it's pleasing to see a fairly substantial change for the better in a short space of time.*as ever, any client would need to meet the eligibility, criteria and affordability as standard.
I'd like to see some further base rate reductions in the coming 12 months, hopefully with another before the year is out, and although predictions change all the time, many industry economists anticipate the same. I think that the Labour budget that's coming in October 2024 is going to be watched with a keen eye by all in the industry. We saw the adverse effects from Liz Truss' cabinet in 2022, and Labour have openly confessed that whilst in power they want to push the housing market forward, especially with their pledge of building many, many new homes. For homes to be built, there needs to be demand. So some form of watertight plan would need to be announced, so that lenders can also comfortably offer mortgage loans at manageable rates for buyers – especially those purchasing for the first time, which seems to be a priority for the new government. Otherwise, it'd be a welcome sight to see the Help To Buy scheme reintroduced.
On the whole, the positives in September outweigh any negatives for us as a firm, and I'm looking forward to seeing further, positive progression in the coming weeks and months.
Jonathan Fowler
Founder & Managing Director
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