Lenders, intermediaries and borrowers have experienced a turbulent few weeks and there’s no denying that this was, and continues to be, a period in which business leaders have to maintain clear heads and demonstrate some strong governance in order to navigate some extraordinary market conditions.
With so many still variables in place, it’s difficult to sum up current lending conditions with any great confidence but what we do know are the events leading up to this period and what we have learned from them.
So, here we go.
The mini-budget saw the confirmation of the widely publicised stamp duty threshold increase for first-time buyers and homemovers. New chancellor Kwasi Kwarteng announced that the threshold had been increased from £125,000 to £250,000 and from £300,000 to £425,000 for first-time buyers. In addition, the value of property that first-time buyers can claim relief on will increase from £500,000 to £625,000. The cut in stamp duty is expected to save first-time buyers an extra £5,000 on average.
Speaking during the mini-budget, the chancellor said that “homeownership is the most common route for people to own an asset” and confirmed that the changes were permanent and will apply immediately.
According to a report by Revolution Brokers on the back of this announcement, first-time buyers in 91% of England’s local authorities will pay no stamp duty. This further outlined that there are only six areas in the UK where first-time buyers are ineligible for stamp duty relief as the price of the average first home is valued at over £625,000. These areas include Kensington and Chelsea, the Cities of Westminster and London, Camden, Hammersmith and Fulham and Islington, accounting for around two% of the total market.
The report added that a further seven% of local authorities, around 21, across England will see the average first-time buyer pay the reduced five% level of stamp duty due to the average price of a first-time buyer home falling between the £425,001 and £625,000 threshold.
This represented some highly positive news for first-time buyers. However, the subsequent reaction to further elements within the mini-budget sent some shock waves through the wider economy and mortgage market, resulting in lenders being forced to reprice due to extreme swap rate volatility, a falling pound and base rate increases – amongst other factors.
As such, we saw product numbers plummet in a very short space of time and a frenetic response from brokers looking to secure the best available products for an array of clients. In its mortgage findings survey, Twenty7tec said that the 27th of September saw a record number of daily mortgage searches. For the first time ever, the company reported handling over 100,000 queries in a day – a total of 101,620 searches.
The very next day, the total residential mortgage product count was suggested to have fallen by a record 935 overnight, bringing the total number to 2,661. According to figures from Moneyfacts, this was the more than double the previous record fall of 462 on 1 April 2020, which was the start of UK lockdowns due to the pandemic.
The Moneyfacts data showed that the largest falls were in two and five-year fixed rates, with both contracting by 344 and 357 respectively. The total number of two-year fixed rates at all LTVs stood at 590, with five-year fixed rates at the 734 mark. Both were reportedly near or above 1,000 previously. It also noted that products were being removed fairly evenly across LTV tiers up to 95%.
Inevitably, this market contraction has led to high levels of activity across the intermediary community and additional pressure being placed on advisers to try to secure the best available option for their clients.
In short, it’s something of an understatement to say that challenges remain across the board amidst such unpredictable conditions, and everyone is currently looking for that bit of stability and certainty to make decisions from a pricing perspective.
On the plus side, options do remain available for borrowers and more are emerging by the day. In addition, advisers across the UK are really demonstrating how vital their experience and expertise is for a variety of clients.
The value of mortgage advice has never been more evident than it currently is and it’s prudent to point out the incredibly important role that the intermediary community continues to play in the face of economic conditions which will hopefully stabilise sooner, rather than later.
David Lownds is head of sales, marketing & business development at Hanley Economic Building Society