It’s fair to say that there have been fluctuating levels of uncertainty looming over both domestic and global economies in more recent times, and uncertainty is never conducive to the most optimal housing and mortgage market conditions.
Thankfully, moving into 2024, greater levels of stability were evident.
However, there were still unknowns around the timing and outcome of the general election, plus if, when and how we were likely to see any significant base rate activity.
These are factors that continued to inhibit borrowing decisions across the UK, therefore serving to impact lending volumes.
Good things are happening
Following the recent, and largely expected, change of government, the immediate signs have been positive when it comes to improved buyer sentiment. Good news has also emerged from a mortgage pricing perspective, with figures from Rightmove suggesting that early July saw average two- and five-year fixed rates fall by almost 1% when compared to data collated in July 2023.
This translates into the average five-year fixed mortgage rate being 4.97%, down from 5.91% a year ago, while the average two-year fix has seen a drop from 6.42% to 5.35%. Inevitably, the largest reduction emerged at lower loan to values (LTVs), with two-year fixed rates at 60% LTV now suggested to be 1.46% lower than July 2023, at 4.78%. The average five-year fix at 60% LTV was reported to be 1.43% lower, falling from 5.78% to 4.35%.
Encouragingly, there are also highly promising signs at the higher end of the LTV spectrum, with average 95% LTV two-year fixes said to be down by 81 basis points to 6.12%, while five-year fixed rates fell by 56 basis points to 5.67%.
Another progressive trend emerged in the latest data from Moneyfacts, which showed that the availability of deals at 95% LTV has risen to its highest level in over two years. Some 361 products were reported to be available at 95% LTV, its highest point since May 2022.
Overall product choice also rose month-on-month to 6,658 options, its highest level since February 2008.
Market challenges still need to be addressed
Despite this progressive uplift, it’s clear that affordability and the raising of deposits remain significant obstacles for purchasers, especially given heightened living costs and mortgage rates. And it’s little wonder that the average age of first-time buyers continues to rise.
As a lending community, it’s crucial to support a range of borrowing needs where possible, in an appropriate manner.
This is especially true for first-time buyers across the higher-LTV bands, as this requires even greater levels of availability, accessibility and innovation to deliver the type of product and criteria that meet modern borrowing demands and enable more first-time buyers to achieve their homeownership dreams.
Of course, for lenders, there remains a delicate balance to maintain from a funding, pricing, risk, and service perspective, but this is a balance we must meet head-on.
All in all, H2 feels almost like a fresh start for lenders and borrowers.
Conditions may still not be ideal but there is significant potential for growth across the market, especially within a 95% LTV band, which currently accounts for only 5% of all available fixed and variable mortgage deals. There is also fresh hope that the new government will be proactive in evaluating and initiating ways in which it can further support first-time buyers.
So, let’s hope that this combination of positive trends, alongside a more certain political future, can help generate some much-needed positive forward momentum across the housing and mortgage markets in the coming weeks and months.
