6 ways the mortgage market just got better

While you may have been busy soaking up the glorious summer we have been having, the Government, together with the Bank of England, banks and building societies, has been working to make mortgage borrowing easier and, for many, cheaper.

Here are 6 key mortgage changes boosting the buyer’s market this coming autumn:

1. Tracker and variable mortgage rates drop: in early August, the Bank of England reduced the base rate from 4.25% to 4%. As a result, lenders have started to revise down their mortgage rates for borrowers holding a variable or tracker mortgage. Those with an outstanding debt of £100,000 should see their monthly repayment decrease by around £15 a month.

2. Fixed-rate mortgages becoming cheaper: there is also good news for those considering a fixed-rate mortgage. In what Moneyfacts describes as a ‘symbolic turning point’ in mortgage lending, the average two-year, fixed rate mortgage has dipped below 5% for the first time in three years.

3. 5% deposit mortgages are here to stay: changes to mortgages aimed at those with low-value deposits were announced in July as part of the Government’s ‘Leeds Reforms’. These are a package of incentives designed to make borrowing money to buy a home easier.

The first is the introduction was Freedom to Buy. This is a permanent mortgage scheme applicable to all buyers who have deposits between 5% and 9% of a property’s asking price. Previous schemes have only been temporary but the Government says Freedom to Buy will offer constant borrowing support for low-deposit buyers.

4. Improved wage multiples incoming: when a borrower applies for a mortgage, the industry standard has been to lend 4.5 times a yearly salary. A small number of mortgages greater than 4.5 times a wage have been permitted but it had to be equal to 15% of a bank or building society’s annual mortgage business.

The Government has, however, taken the advice of the Bank of England and relaxed this cap so individual lenders can offer more than 4.5% a person’s salary on a more regular basis. As a result, buyers should enjoy extra opportunities to borrow more money than previously.

5. Minimum income required drops: the Leeds Reforms had an instant impact over at the Nationwide, who revised its ‘Helping Hands’ mortgage product. Borrowers can now access mortgages with a lower income, as follows. A solo first-time buyer now needs a yearly wage of £30,000 to apply, down from £35,000. Joint applicants now need to earn £50,000 – down from £55,000.

6. Rent payments taken into account: for the first time, rent payments will be taken into account when applying for a mortgage. In the past, the Financial Conduct Authority’s (FCA) lending rules discounted prompt rental payments as a way for borrowers to prove affordability and good money management.

The Government was vocal about changing this when delivering its Leeds Reforms and there are signs change is already happening This August, Suffolk Building Society announced it was altering  its lending criteria for first-time buyers. It will now consider a borrower’s rent payment history they have built up over a minimum of 12 months.

If the positive mortgage news has given you the confidence to buy your first home or move up the property ladder, please get in touch with White & Brooks. Our branches in Chichester, Bognor Regis and Haslemere are here to help with calculations, budgets and mortgage broker recommendations.