Mortgage Market Briefing – August 2019

Falling swap rates caused mortgage rates to drop substantially during August, with many homeowners capitalising by taking out longer-term fixed rate deals.

Swap rates, which are one of the factors used by lenders to determine the interest rates charged to customers, fell from 1.41% in August 2018 to 0.6% this month. This has already fed through to mortgage rates, with five-year fixes seeing the biggest price reductions.

The average five-year deal has dropped from 2.84% to 2.79% in August, according to data compiled by Moneyfacts. The biggest cuts were seen in the 80% loan-to-value (LTV) band, its report said, while those at 95% LTV had moved the least.

Low rates are still enticing borrowers to market and the slowing property market is also helping some new buyers get on to the ladder as prices stall.

ONS figures revealed that the UK housing market has been slowing for the past three years.

Figures from the Office for National Statistics showed that the average UK house price increased by just 0.9% in the year to June 2019. The slowdown has been prompted by a decline in prices across many parts of southern England.

In the last 12 months, prices in London fell by 2.7%, faster than anywhere else in the UK. Prices in the capital have now been falling on an annual basis since March 2018. Prices in the South East and South West also dropped compared to last year.

However, London still remains the most expensive place to buy a property, with an average house price of £467,000.

Elsewhere, prices in Wales now stand at £164,000 after growth of 4.4% in the last year. This was ahead of Northern Ireland where prices rose 3.5% to £137,000 and Scotland, where prices increased by 1.3% to reach £152,000.

Prices in England were held back by the falls in London and other southern regions. There was growth of just 0.7% across the country, leaving the average house price at £247,000.

One side effect of the slow property market has been the benefit it provides to parents wishing to move to a house located in the catchment area of a top school. Figures published by Santander showed that the average “good school premium” has fallen from £51,600 to £19,500 in the last 12 months.

This means an average house located in a top school’s catchment area now has a 5% premium compared to properties outside of the area. This is below the 15% premium recorded a year ago, when the survey was last carried out.

The wider mortgage market was once again driven by existing homeowners taking equity from their home.

UK Finance, the trade body, said that in June there were 16,880 new remortgages completed where the borrower took cash from the value of their property. This is 8.3% higher than the same point last year.

By comparison, the number of pound-for-pound remortgages, those likely switching to a cheaper rate, fell by 23.9% to 15,320. Elsewhere, there was a modest decline in the number of first-time buyer, home mover and buy-to-let loans completed during the month.

Richard Sexton – Business Development Director, e.surv Chartered Surveyors

Sources:

https://moneyfacts.co.uk/news/mortgages/competition-on-five-year-fixed-rate-mortgages-intensifies/

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/june2019

https://www.santander.co.uk/uk/infodetail

https://www.ukfinance.org.uk/data-and-research/data/mortgages/lending-trends