Mortgage Market Briefing - April 2019 - e.surv Chartered Surveyors

Market Insight, Mortgage Market Briefing //

Mortgage Market Briefing – April 2019

Homeowners looked to remortgage to a cheaper interest rate, while activity in the property market was once again sluggish.

Recent mortgage market trends continued as more homeowners looked to remortgage to a cheaper interest rate, while activity in the property market was once again sluggish.

Industry analyst Moneyfacts published figures which showed that homeowners who took out their last loan two years ago face a hefty increase in interest rates in the near future.

Remortgaging spiked in the summer and autumn of 2017, boosted by speculation that the Bank of England would increase the base rate. Two years on and these customers are now coming to the end of their term and must switch again or face a much higher interest rate.

The average two-year fixed rate mortgage in May 2017 was 2.3%. If the same borrower reverts to today’s typical standard variable rate (SVR) of 4.89%, they will see monthly payments more than double (+2.59%). Those customers who took out a loan later in the year will see an even bigger rise.

The average two-year fix in October 2017 was 2.2%. If SVRs stay the same for the rest of the year, they would be faced with a 2.69% rise when this initial period expires.

The possibility of such large savings is why activity in the remortgage market remains strong, despite a slowdown in many other parts of the industry.

Figures published by UK Finance showed that remortgage activity in February increased by 10% for loans where additional cash was taken from a property. The average equity taken from a home was £52,000, reflecting higher house prices in many areas compared to when these loans were originally taken out.

The number of pound-for-pound mortgages, where the owner is simply trying to move to a cheaper rate, grew by 7.8% year-on-year.

First-time buyer activity grew more modestly, rising 4.1% compared to February 2019, but the slowdown in the buy-to-let market continued. The number of new loans to landlords dropped by 7.7% in the last 12 months.

Many areas of southern England are now seeing house prices fall. Figures compiled by the Office for National Statistics showed that prices have fallen by 3.8% in London in the year to February 2019. In the South East the average property value dropped by 1.8% in the same time frame.

When all regions of the UK are considered, prices rose by 0.6% in the last year. This annual growth rate is down on the 1.7% recorded in the year to January.

The average UK house price now stands at £226,000, £1,000 higher than a year ago.

This slowdown in house price rises means that just 8% of properties have seen their value rise by more than the average annual salary. As recently as 2016 price growth outstripped earnings in 31% of council areas.

However, some areas continue to post dramatic price rises. In Richmond-upon-Thames, London, the average property saw a price increase of £55,483, the equivalent of £2,312 per month.

The next biggest gap was in Winchester, Hampshire, where prices grew by £45,016.

Richard Sexton – Business Development Director, e.surv Chartered Surveyors