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Mortgage rates for first-time buyers are now about as low as they were before the pandemic

Mortgage rates for buyers with 5% and 10% deposits are declining at the highest rate of any mortgage type as first-time buyers return to the market on post-stamp duty holidays. ..

The typical two-year fixed rate for a 10% deposit mortgage commonly used by first-time buyers fell 0.29 points to 2.56% last month alone.

Meanwhile, according to the latest figures from financial information service Moneyfacts, a two-year revision to 5% of products decreased by an average of 0.25 points to 3.32% over the same period.

Lower mortgage rates mean that first-time buyers may find it easy to get on the ladder

The monthly decline is greater than that seen with 40% deposit mortgages, interest rates have fallen dramatically in recent months, and plumbing depth can now be less than 0.8%.

These declines bring interest rates on low-deposit mortgages very close to pre-pandemic levels.

The lowest rates available are even cheaper, 1.79% and 2.67%, but these can be expensive overall due to the high arrangement fees involved.

“Now is a really good time for first-time buyers to get really good mortgage deals,” says Heron Financial mortgage broker Matt Coulson.

“We continue to expect things to slow down as interest rates continue to fall, but so far, interest rates have continued to fall.”

However, anyone trying to ride a property ladder may have limited time to engage in these attractive deals.

If the Bank of England’s base interest rate rises, mortgage rates could rise. This can happen as early as the end of the year.

“As inflation rises, interest rates can start to rise, especially if the Bank of England’s base interest rate rises,” said Katie Brain, a banking expert at financial information service Defaqto.

She added that increased living costs could make it more difficult for first-time buyers to pass the lender’s affordable checks.

These are calculations that lenders perform based on the salaries and expenses of potential homebuyers.

“The affordability of first-time buyers can also be squeezed by rising living costs,” Brain added.

The current decline in interest rates represents a significant improvement in the outlook for the mortgage market for first-time buyers with 5% and 10% deposit products withdrawn from the market during the first national blockade in 2020. increase.

When they gradually returned, the rates were raised much higher than before, reflecting the lender’s new attention.

“The average fixed rate on high-loan-to-value mortgages fell the most dramatically last month, but looking at the best purchases in these groups, it’s currently offered compared to pre-Covid. Things don’t make much of a difference, says Mark Harris, CEO of Mortgage Broker SPF Private Client.

“It shows how high rates soared during the pandemic for people with low deposits, as lenders considered these borrowers to be at higher risk.”

First-time buyer mortgages: pre-pandemic and current
Rate type Best Buy, October 2019 Best Buy Now
2-year correction, 10% deposit Barclays @ 1.77%, £ 999 Fee, £ 0 @ 2.08% Halifax @ 1.79%, £ 999 commission
2 year correction, 5% deposit HSBC @ 2.69%, £ 0 fee Skipton @ 2.67%, £ 495 Fee
5 year correction, 10% deposit Virgin @ 2.25%, £ 995 commission Platform @ 2.16%, £ 1999 price
Or HSBC @ 2.49%, £ 999 commission
5 year correction, 5% deposit Newcastle @ 2.9%, £ 499 Skipton @ 3.08%, £ 495 Price
Source: SPF Private Client Mortgage Broker

As of this month, the average two-year fixed interest rate on 5% deposit mortgages has fallen by almost 1.5 points from 4.74% in October 2020 to 3.32% today, according to Moneyfacts.

The usual 10% two-year fixed rate has dropped from 3.64% to 2.56% and is now almost 1 percentage point lower. However, product availability was severely restricted a year ago as creditors recovered from the blockade.

Looking at the five-year revision, the normal interest rate on 5% deposit mortgages has fallen by 0.45 percentage points, and over the past year, 10% deposit products have fallen by 0.84 percentage points.

However, buyers should also consider the impact of arrangement fees rather than looking for the lowest possible rate.

By summing the charges along with the monthly payments, they can calculate the total annual cost of the mortgage. As shown in the example below, they may find it cheaper to charge a higher rate at a lower or free rate.

This can be done to buy your own home using This is Money Mortgage Calculator.

Best Mortgage: 10% Deposit, 5-Year Correction, £ 200,000 Home Purchase
Lender ratio Commission Annual cost
Santander 2.50% £ 749 £ 9,840
Atom Bank 2.59% £ 400 £ 9,868
Halifax 2.63% £ 200 £ 9,872
HSBC 2.49% £ 999 £ 9,879
Leeds BS 2.69% £ 0 £ 9,898
Source L & C / This is a money mortgage tool

First-time buyers flood the market

The combination of low interest rates, blocked savings and a milder market is attracting first-time buyers to more and more real estate markets.

According to Experian, daily mortgage applications for borrowers in their 30s increased by 14% in September 2021 compared to the previous month, while applications from borrowers in their 20s increased by 9%.

Comparing September 2021 and September 2020, the average number of mortgage applications in their 30s per day has increased by 20%.

During the stamp duty holidays from July 2020 to the end of September 2021, movers rushed to complete their purchases, pushing up home prices by up to 10% or £ 25,000 in the process.

Mortgage rates for borrowers with 10% deposits are currently as low as 1.67%

Mortgage rates for borrowers with 10% deposits are currently as low as 1.67%

However, this has less of an impact, as first-time buyers do not pay taxes on purchases under £ 300,000.

Today, some of them are armed with blockade savings and are returning to the housing market.

James Jones, Head of Consumer Affairs at Experian, said:

“Many people have used blockade savings to secure the perfect home. More than one-third (36%) of people in their twenties say pandemics helped save deposits, those in their thirties. “

Do first-time buyers need to revise for five years in the face of rising base interest rates?

Interest rates are higher than the two-year adjustment, but with a five-year adjustment, buyers can now fix favorable interest rates and protect them from potential increases in the Bank of England’s base interest rates. This will result in a mortgage interest rate. Rise – longer.

Currently, a 0.1% base interest rate hike is expected as early as December.

It could rise with a small margin at that point, but it could rise further over the next five years and is unlikely to drop to 0.1% again for some time.

“The general consensus is that the Bank of England is likely to step up its base interest rate to measure its impact on economic demand,” said Gerald Boone, a mortgage broker at Boone Brokers. increase.

“If this is true, mortgage rates could rise gradually over the next few years, but we hope we don’t see a sharp rise.”

However, a buyer with a five-year amendment will not be able to transfer or “transplant” all mortgages to another property and will be charged a fee to close the transaction early, so they will be home within five years. You need to consider whether you want to go home.

Katie Brain of Defaqto added: In some cases, there are more gaps in 10% deposit products.

“However, the early repayment fee is usually applied for 5 years, so it depends on the individual situation.”

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Mortgage rates for first-time buyers are now about as low as they were before the pandemic

Source link Mortgage rates for first-time buyers are now about as low as they were before the pandemic

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