Mortgage Market Briefing – January 2019

First-time buyers flocked to take out mortgages in November 2018, although remortgage customers remain the main driver in the market.

Figures published by the UK Finance trade body showed 39,600 homeowners were able to remortgage in November 2018. This was 1.3% higher than November 2017 and was the part of the market that saw the highest level of activity within the month.

First-time buyers saw a large rise in activity compared to a year earlier. 36,200 first-time buyer mortgages were completed in the month, up 9.1% year-on-year.

Other parts of the market fared less well. The downturn in the buy-to-let sector continued in November, when just 6,100 new buy-to-let home purchase mortgages were completed. This was 9% fewer than the same stage in 2017.

Remortgage activity is expected to stay strong into 2019, with large financial incentives for borrowers switching to a cheaper deal. Data published by Moneyfacts showed that the gap between the typical standard variable rate (SVR) and two-year deal has reached its largest level for 11 years. The data provider said the typical borrower could save more than £3,000 a year by switching. Homeowners who took out their previous loan in January 2017 and who are now coming to the end of a two-year fixed rate deal, stand to benefit the most from locking into a new mortgage.

Two years ago, the average two-year fix was available for 2.31% to borrowers, this compares to the average SVR today of 4.9%.

There was long-awaited good news for “mortgage prisoners” as the Financial Conduct Authority (FCA) promised to change lender affordability tests to ensure trapped borrowers can switch to a new bank.

Mortgage prisoners are those people trapped paying a high mortgage rate but unable to switch lenders as they would fail the affordability tests applied by banks, even if their monthly repayments would be lower.

Under plans unveiled by FCA chief Andrew Bailey, mortgage prisoners will be able to avoid the standard affordability test and will instead be subject to a “relative test”. Such a test would ensure borrowers could switch, as long as the monthly payments on their new loan were lower.

House prices continued to grow across much of the UK, with the average price rising by 2.8% in the year to November 2018.

The Office for National Statistics found that London was the only region where prices fell on an annual basis. The average price in the capital fell by 0.7% but remains the most expensive area of the UK with an average sales price of £473,000.

The fastest price growth came in the West Midlands, where the typical house price increased by 4.6%.

When the four nations of the UK are considered, house prices in England grew slower than elsewhere. Prices grew by 2.6% in the last year to stand at an average of £247,000.

Welsh house prices grew the fastest, rising 5.5% year-on-year to £161,000, while Northern Irish prices were up 4.8% to £135,000. In Scotland the average price is now £151,000 following growth of 2.9% in the last 12 months.

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

Sources:

https://www.ukfinance.org.uk/more-first-time-buyers-get-a-foot-on-the-housing-ladder-in-november-2018/

https://moneyfacts.co.uk/news/mortgages/motivation-to-remortgage-at-11-year-high/

https://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news-parliament-2017/chairs-comments-fca-mortgage-prisoners-17-19/

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/november2018