June Mortgage Update - Volatility in the Markets

Date Published 13 June 2023

Volatility in the UK Mortgage Market: What You Need to Know
By Shane from Youngstone Financial

The past few weeks have been marked by significant turbulence in the residential mortgage market in the UK. Lenders have been swiftly withdrawing rates, catching borrowers off guard with little to no notice. The unpredictability has made it challenging for individuals applying for mortgages, as rates have been fluctuating rapidly. This volatility can be attributed to inflation figures exceeding expectations, leading to concerns about potential Bank of England (BoE) rate hikes and triggering panic among lenders. Despite these uncertainties, it's important to note that lenders are still actively lending, albeit with revised pricing based on rate increase expectations and Swap rate movements.

Residential Mortgage Rates:
When considering fees, costs, and cashback, the best 5-year fixed purchase rate for residential mortgages at 75% loan-to-value (LTV) currently stands at 4.64% offered by HSBC. This represents a significant increase of 0.75% compared to the previous update. Similarly, the best 2-year fixed rate is now an exclusive product with Hanley at 4.85%, reflecting a rise of 0.70%. Interestingly, there is a growing availability of variable or flexible lending options for 2-year terms, which often come with lower rates than fixed-rate mortgages. Moreover, it's worth mentioning that a "stepped" mortgage product, which had been relatively rare in recent years, has resurfaced.

Buy-to-Let Lending:
In contrast to the fluctuations observed in the residential mortgage market, buy-to-let lending has remained relatively consistent. While some lenders have withdrawn rates and adjusted pricing, the overall landscape has been more stable. For buy-to-let mortgages at a 75% LTV, the best 2-year purchase rate is currently at 4.70%, representing a slight decrease, while the best 5-year rate is 4.41%. It's important to note that rates may vary when using a limited company for buy-to-let purposes, and further details can be provided in future updates.

The recent volatility in the UK residential mortgage market has presented challenges for borrowers, with lenders frequently withdrawing rates and repricing their products. The unexpected persistence of inflation figures has raised concerns about potential BoE rate increases, contributing to the unease among lenders. However, despite these circumstances, lenders are still actively providing mortgages, albeit with revised pricing based on expectations of rate hikes and Swap rate movements.

It's essential for borrowers to remain vigilant and seek professional advice when navigating the current mortgage market. Additionally, staying informed about the evolving landscape and understanding the nuances of buy-to-let lending can help borrowers make informed decisions. While uncertainty persists, the mortgage market continues to function, albeit with ongoing adjustments in response to prevailing economic conditions.

Contact Shane Livingstone for your Mortgage Advice - 07887568568