"It has been a long road back to any semblance of a recovery, particularly in terms of higher LTV product numbers and in terms of moving towards a rate environment below the highs of mid-2023."
As we motor towards the end of the year, it seems right to review what has happened over a roller-coaster last 12 months, and to see if we’re in a better shape now than we were when 2023 began.
Certainly, it has been a year of distinct parts. For all the worry post-‘Mini Budget’ in Autumn 2022, by the time we had reached the first quarter of 2023, the mortgage market was recovering, product rates were certainly coming down, and while we might not say it was a record-breaking period in any shape or form, there was some momentum to activity levels.
Unfortunately, by Spring that had dissipated, as inflation went above double-digits, the money markets reacted, rate anticipation reached new highs, and lenders ended up pulling hundreds upon hundreds of products and repricing those that remained at much higher rates.
That, if you like, was the second stage of the year, and since then it has been a long road back to any semblance of a recovery, particularly in terms of higher LTV product numbers and in terms of moving towards a rate environment below the highs of mid-2023.
The road to recovery, if you like, continues to stretch before us and without any real, meaningful housing market support in the Autumn Statement, it is a road that the industry will have to motor along on its own.
Yes, the Chancellor announced an extension to the Mortgage Guarantee Scheme but this is unlikely to make a huge difference, and you can’t help but wonder whether taxpayer’s money could be better spent elsewhere and if the Government shouldn’t be supporting the private schemes that already exist.
They are much more flexible, tend to be not as costly, and given the vast majority of lenders are not using the Government Scheme anyway, would surely be a more cost-effective use of State resources.
Overall, when it comes to product choice in the 95% LTV space, I’m pleased to say this has continued to improve over the past few months, however we should also recognise we are still not at the levels we saw pre-‘Mini Budget’.
Each month I review product numbers for first-timers at high LTV levels, based on the most recent Nationwide house price index covering the cost of an average home in the UK. This month, that figure is £258,557 which would require a 5% deposit level of £12,928.
The average house price is 2% down on the figure from this time last year, but interestingly 0.2% up – seasonally adjusted – on November’s figures. The significant dip in house prices many have been anticipating just hasn’t materialised, and given supply issues, one wonders if we’ll see those double-digit drops that a number of economists are still predicting.
There is further good news this month in the 95% LTV product space, with numbers currently sitting at 189, up five on last month, a mixture of 167 fixes and 22 trackers/discounts/variables.
It will now be interesting to see whether lenders, in the quest for volume and profit, seek to look at higher LTV products more and more. A number of players have announced lending volumes down significantly on 2022 levels, and if they are to change the dial on this in 2024, they may well have to look beyond ultra-low risk 60% LTV business, in order to appeal to those who are in a position to purchase, such as wannabe first-timers.
Rates wise we have seen some notable moves from many lenders in recent weeks, and while this is translating into the higher LTV space, we’re not seeing significant drops as we might be seeing in lower LTV. Skipton continue to have the best five-year fixed-rate, down from 5.22% last month to 5.17%, while the best national two-year fix comes from the Yorkshire Building Society at 5.69%, down from 5.89% last month.
In the variable space, Progressive have a two-year discount at 5.25% - but only available in Northern Ireland – while Vernon’s lifetime discount at 5.4% remains, as does the Newbury’s three-year discount at 5.44%. No change in pricing for either of these two deals compared to last month.
Overall, we are certainly in a healthier position than we were six months ago, and a combination of factors could allow lenders to move pricing down even further in the high LTV space in the weeks and months ahead.
One of those could be the greater use of private mortgage insurance products as this would offer them the risk mitigation they need plus the ability to be more competitive within a product space which is increasingly needed, not just by first-timers but other homeowners as well.
