So, 2023 is now fully underway and we await to see just how the mortgage market might play out, following a year in which there were a lot of ups and downs, but (in terms of lending) the sector completed a significant amount of business.
Most of the forecasts for the year ahead anticipate less lending being achieved, and with that potentially praying on the mind of lenders – who are unlikely to have reduced their targets significantly – it has been interesting to get some early views on the early days of the year.
Prior to the end of 2022, I read a number of commentators suggesting 2023 would kick off with a bang. It is, of course, very early days but I’m not seeing huge shifts in terms of lenders seeking to make a big splash, in order to secure business, but even with more speculation about further rises in Bank Base Rate (BBR), we are continuing to see product rates shift further south.
As you may know, each month I look specifically at the high LTV (95%) market in order to ascertain how lenders view the sector, and their appetite to lend to what is predominantly a first-time buyer borrower demographic.
Again, there has been a lot of noise recently with differing views on just how ‘good’ a year 2023 might be for the potential first-timer. Certainly, the spectacularly bad ‘Mini Budget’ did them no favours at all, shifting pricing up, drawing significant numbers of products out of the market, and making affordability very difficult in terms of achieving the loans they required.
Let’s not kid ourselves, within the 95% LTV product space, we are still not back to those pre-September levels in terms of product numbers and pricing, but we are slowly but surely moving back in that direction.
Using the Nationwide House Price Index average national house price figure of £262,068, I reviewed the product numbers and pricing available for first-time buyers able to put down a 5% deposit of just over £13.1k.
Very quickly, on house pricing itself, again some commentators believe that further drops in prices will make it more affordable for first-time buyers in 2023, however as we know, if we do not have the supply of high LTV mortgages, then vast numbers of those who want to buy, are not going to be able to do so.
The good news is that product numbers have gone up again, from 114 last month to 126 so far in January. Again, while the bulk of this number – 102 – are fixed-rates, the current cheaper deals are discounts/trackers, with Loughborough Building Society continuing to lead the way with its 3.29% three-year discount.
However, the ‘best buy’ fixed-rates appear to have been cut over the last month. Monmouthshire currently offer a two-year fix below 5%, at 4.9% – the only two-year fix anywhere near the top fixed-rate deals I might add – while both Halifax and Monmouthshire are offering a five-year fix at 5%.
Halifax’s inclusion at the top of this table has the potential for not just a significant amount of lending, but also the opportunity for similarly-sized mainstream lenders to react to what the Halifax is offering here.
I think it’s far too early to talk about any sort of ‘price war’, particularly in this space of the market, but the fact one of the biggest lenders in the UK is offering the best-priced five-year fix at 95% LTV, is significant and hopefully will act as a catalyst for further price action, and as a result, more first-timers able to secure the mortgages they want and need.
One final point, last month I speculated on what the closure of the government’s Guarantee Scheme would have on product numbers, however that is now clearly not an issue as the Scheme was extended until the end of this year, late in 2022.
Despite it supporting a relatively small number of mortgages since its inception, no-one can deny the impact it has had, the confidence it has clearly given lenders, and the fact it was pivotal in the re-emergence of the high LTV sector. The fact it remains may not be as significant as the fact it was introduced, but anything that helps lenders feel more comfortable lending in this space, is no bad thing. Let’s hope though that this year will be the final one of government intervention.
Overall, as we kick off the year, it is very positive to see progress in the numbers of 95% LTV mortgages available – the more, the merrier, and the more likelihood we’ll be able to help significantly more people onto the housing ladder for the first time.
Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International