Posts with tag: interest rates

Bank of England Holds Base Rate at 0.75%

Published On: February 8, 2019 at 10:59 am

Author:

Categories: Finance News

Tags:

Yesterday (7th February 2019), the Bank of England decided to hold the base rate at 0.75%.

The Bank’s Monetary Policy Committee (MPC) voted unanimously to keep the base rate at 0.75%. It has stayed at this level since it was raised from 0.5% in early August last year.

In terms of the housing market, the MPC expects UK house prices to be broadly flat in the first quarter (Q1) of this year, in line with predictions from Nationwide and Rightmove.

Furthermore, the Committee forecasts that housing investment will fall within the same timeframe. 

Angus Stewart, the Chief Executive of Property Master, an online mortgage broker, comments on the announcement: “Today’s decision not to increase the base rate is hardly unexpected, given the current uncertainty around Brexit. You could say the Bank is kicking the can down the road, as it is likely base rates will need to move upwards at some point. Many current commentators are pencilling in a rise in May, with possibly another hike later in the year.

“Our latest Mortgage Trackerpublished earlier on this week, which follows rates and fees from 18 of the largest lenders in the buy-to-let market, revealed a mixed picture on the cost of fixed rate buy-to-let mortgages. The cost of three out of the six categories we track had increased compared to last month (January), but the remaining three categories had fallen in cost. There are some good deals to be had in the five-year fixed rate market, as long as a landlord is able to meet a lender’s specific criteria. Landlords shopping around also need to bear in mind there may be additional costs of remortgaging, such as product fees, which our research shows can average between £658 and £1,212.”

Nick Chadbourne, the Chief Executive of LMS conveyancing services, says: “Record low interest rates are encouraging borrowers to take advantage of the market and lock into longer, more affordable deals. LMS data is also showing a trend of remortgagers opting to take out five-year fixes, as they come off of two-year deals, giving them greater certainty for longer. 

“A stay in rate rises shouldn’t be taken for granted, however, and increasingly consumers are getting wise to this. Our research from January reveals that 60% of borrowers expect interest rates to increase within the next year.”

Fixed Rate Buy-to-Let Mortgages Becoming More Expensive

Published On: November 8, 2018 at 11:00 am

Author:

Categories: Finance News

Tags: ,

Fixed rate buy-to-let mortgages look to be becoming more expensive across the board, according to the latest Mortgage Tracker from online mortgage broker Property Master.

The report has been compiled every month since January this year, but this is the first time that a month-on-month increase has been recorded across all classes of two and five-year fixed rate deals.

According to the research, the monthly cost of a two-year fixed rate buy-to-let mortgage for a typical amount of £150,000 increased by between £2-5 a month in November, depending on whether the landlord was borrowing 50%, 65% or 75% of the value of the property.

The same calculation for a five-year fixed rate deal has risen by between £4-5 a month over the same period.

While this growth is relatively modest, it is the first time a month-on-month increase across all types of fixed rate loans has been recorded.

The Mortgage Tracker follows a range of buy-to-let mortgages for an interest-only loan of £150,000. The rates and costs recorded include product and application fees.

Deals from 18 of some of the biggest lenders in the buy-to-let market were tracked, including: Barclays, BM Solutions, RBS, The Mortgage Works, Godiva, and Precise.

This particular Mortgage Tracker was calculated on 1st November 2018, the day that the Bank of England’s Monetary Policy Committee announced a decision to hold the base rate at 0.75%.

Angus Stewart, the Chief Executive of Property Master, comments on the report: “Even though the Bank of England decided to hold the base rate this time around, it does look as if buy-to-let fixed rates are beginning to trend up, following the previous increase in the summer. Also, the Bank reiterated its view that interest rates generally will need to go up further over the coming months. Private landlords will need to shop around to get the best deal, but they may find those good deals become, over time, more difficult to find.

“That said, competition amongst buy-to-let lenders is still healthy, and we are seeing new developments and deals coming out all the time. There are over 1,000 fixed rate mortgages on offer for landlords, so it is important landlords look for a broker that had the technology to really provide coverage across that increasingly broad waterfront.”

Buy-to-Let Mortgage Rates Drift Upwards Following Rate Rise

Published On: September 13, 2018 at 10:00 am

Author:

Categories: Finance News

Tags: ,

August’s 0.25% increase in the Bank of England’s base rate has begun to feed through to buy-to-let mortgage rates, according to research carried out by online mortgage broker Property Master.

The news comes as the Bank’s Monetary Policy Committee (MPC) prepares to meet again today.

The average standard variable rate for a buy-to-let mortgage unsurprisingly saw the greatest month-on-month increase, with the cost on an interest-only loan of £150,000 jumping from £603 per month to £620.

For average five-year fixed rate loans, which are increasingly popular with private landlords looking to manage their outgoings over time, the cost of a similar loan rose from £348 per month to £350 if the customer was looking to borrow 65% of the value of the property, and from £423 to £425 if 75% of the property’s value was required.

The Mortgage Tracker from Property Master follows a range of buy-to-let mortgages for an interest-only loan of £150,000. The rates and costs recorded include product and application fees. Deals from 18 of some of the biggest lenders in the buy-to-let sector were tracked, including: Barclays, BM Solutions, RBS, The Mortgage Works, Godiva and Precise.

Angus Stewart, the Chief Executive of Property Master, comments: “The move by the Bank of England to normalise borrowing rates following the last market crash seems to be truly underway, and it is beginning to feed through to buy-to-let mortgage rates, which, up until now, have been relatively stable. The MPC meets again [today], but market commentators are not yet expecting another rate rise quite so soon.

“However, private landlords, especially those on standard variable rates that have seen a big jump in cost month-on-month, should really be carefully evaluating their finance requirements. Whilst increased competition has helped to keep costs down to some extent, the trend is now upwards, and we would expect keenly priced fixed rates to be snapped up.”

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

Published On: August 15, 2018 at 8:05 am

Author:

Categories: Finance News

Tags: ,,

A surge in remortgaging during June was bolstered by this month’s interest rate rise, according to analysis of the latest UK Finance figures.

The report indicates that 37,400 new homeowner remortgages were completed in June, which is up by 8.4% on an annual basis. This £6.8 billion of remortgaging was 13.3% higher than in June 2017.

Meanwhile, 33,700 new home mover mortgages were completed in the month, some 7.9% fewer than in the same month last year. The £7.3 billion of new lending was 6.4% down year-on-year. The average home mover is 39-years-old and has a gross household income of £56,000, UK Finance found.

For first time buyers, there were 34,900 new mortgages in June, down by 3.6% annually. By value, this £5.8 billion of new lending was 1.7% lower. The average first time buyer is 30-years-old, with a gross household income of £42,000.

The report also shows that 5,400 new buy-to-let home purchase mortgages were completed in the month, some 19.4% fewer than in the same month of 2017. This £0.8 billion of lending was down by 11.1%.

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

There were 12,600 new buy-to-let remortgages in June, which is the same as in June last year. By value, this equated to £2 billion – also the same as 2017.

Comments

The Director of Mortgages at UK Finance, Jackie Bennett, explains the data: “Remortgaging continued to dominate in June, with figures up 13% on the same period last year, as existing two and three-year products came to an end and borrowers opted for new deals.

“Despite a boost in recent months, speculation of a base rate rise saw the market remain relatively subdued, with year-on-year declines in activity among both first time buyers and homemovers, as customers adopted a wait-and-see approach.

“House price inflation has moderated in recent months, yet it still remains above earnings growth, and so affordability is still a challenge for would-be borrowers.

“And, although the full impact has yet to be felt, tax and regulatory changes continue to bear down on borrowing activity in the buy-to-let purchase market.”

Shaun Church, the Director at mortgage broker Private Finance, also comments: “Despite numerous pledges and incentives from Government to get more people onto the housing ladder, June showed a disappointing performance in the first time buyer market. Mortgage eligibility remains the key stumbling block for many prospective buyers, so the recent relaxation of lending criteria from major lenders could help boost activity among first time buyers in the future.

“The remortgage rally has continued into summer, no doubt bolstered by the speculation of August’s rate rise. Borrowers may be thinking they have missed the boat to lock into rock bottom rates following the base rate rise, however, rates remain very affordable. Those lingering on a standard variable rate are urged to consider swapping to a fixed rate now, as they could potentially save thousands in the long-run.”

The Group Operations Director at Just Mortgages and Spicerhaart, John Phillips, offers his thoughts: “These latest figures show that the housing market is struggling, especially amongst home movers, where activity is down 7.9%. I think the main reason for this is not that people don’t want to move, but they are reluctant to because Stamp Duty is so high that they are not prepared to shell out thousands of pounds just to move. So, they are staying put.

“The trouble is, while remortgaging is up, which is good – but is more to do with rate rises than anything else – the UK economy needs people to move house, because it has a positive knock-on effect on so many other sectors. So, if the Government wants to fix this, it needs to make a bold statement.

“The Stamp Duty cut has worked for first time buyers, but we need similar incentives for the rest of the market. I would like to see an 18-month suspension of Stamp Duty across the board. This gives the market seven months or so before the Brexit deadline in March, and a year afterwards, to let things settle.”

Interest Rates Raised to 0.75%, After Bank of England Meeting

Published On: August 3, 2018 at 8:07 am

Author:

Categories: Finance News

Tags:

The Bank of England Monetary Policy Committee (MPC) made the decision yesterday to raise interest rates to 0.75%. This is the first time that the base rate has risen above 0.50% in almost ten years.

 

David Whittaker, chief executive of Keystone Property Finance and buy-to-let mortgage broker Mortgages for Business has commented on this decision: “The 0.5% Bank Rate has finally met it’s Waterloo. The futures market has been calling a 91% probability that the rate would move up recently – so this isn’t exactly an about turn for the MPC. That doesn’t change the fact that it can’t have been an easy call for the committee to make.

The jobs market aside, the economy isn’t going great guns at the moment and the possibility of a no-deal Brexit – or, indeed, an early general election if the Government falls – will have made the decision harder. But it won’t take lenders long to nail their colours to the mast and adjust their pricing, particularly those who have spent the last year absorbing costs instead of passing them onto borrowers. Shorter-term fixed rates are likely to be the first to be punished. We may even see lenders hold off a little longer before adjusting five year fixed products. But mortgage rates will be going up sooner rather than later. Borrowers will have to expend a bit more blood, sweat and tears reworking their sums and cash flow projections.”

 

Ludo Mackenzie, Head of Commercial Property at Octopus Property, has said:“This [decision] is significant yet unsurprising. Whilst the residential and commercial property sectors, particularly in London and the South East, continue to face challenges, stakeholders should be in a robust enough position to stomach a 0.25% increase and small, well signposted steps, should be welcomed.

Yes there will be winners and losers, but over the longer term it is to be expected that rates should normalise; something that is in the interest of a properly functioning economy.”

 

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, has laid out her evaluation of this increase:

Savings

“Today’s rate decision is a beacon of hope for savers, who have grown tired of the low rates that have plagued them for so long. This base rate rise carries much expectation, with savers hoping it will boost returns. However, just like the rise in November, providers are likely to be selective with the rates they choose to increase.

“Fuelled by intense competition from newer banks, the fixed rate bond market has notably improved since the last base rate rise in November. For example, the average two-year fixed rate stood at 1.43% in November 2017 and has climbed to 1.58% today. The average five-year fixed rate has also grown, rising by 0.16% to stand at 2.15% today.

“However, rates still have a long way to climb, as back in February 2009 – the last time base rate stood above 0.50% – the average easy access account paid 1.19%, whereas now it pays just 0.53%. The average one-year fixed rate bond stands at 1.34% today, a whopping 1.60% lower than back in February 2009.

“Every saver now has their fingers crossed that this latest base rate rise may go some way to returning rates to those levels, but like last time, providers are likely to be slow to react and choosy with their increases. This means savers must be on the ball to ensure they get the best possible deal. Regardless of whether their rate increases or not, savers should use this latest rise to assess their options and ensure that, at the very least, their account pays more than base rate.”

Mortgages

“With the vast number of lenders increasing rates in the lead up to May’s rate announcement, providers have chosen to keep rates relatively static in the run-up to this one, having already been prepped for a rise. However, some lenders have increased rates, with 28 providers increasing some rates in July some more than twice. This has seen the average two-year fixed mortgage rate increase from 2.33% in November 2017 to 2.53% today.

“Longer term fixed rates are likely to be more popular now among borrowers as they try to protect themselves from future base rate rises. This increase in demand has seen five-year fixed rates grow at a slower pace. For example, the average five-year fixed rate has increased by just 0.05% since November 2017 stand at 2.93% today.”

 

Shaun Church, Director at Private Finance has commented:“Today’s rate rise will inevitably have a knock-on effect on the mortgage market. Borrowers on a fixed-rate deal have little to fear, as they won’t be impacted until their current deal runs out. Those with variable and tracker rate products, however, will soon start to see their repayment costs rise as lenders begin to up their rates.

“The rise to 0.75% is fairly moderate and borrowers have been enjoying record-low mortgage rates for some time now, so the immediate impact won’t be too severe. However, when it comes to interest rates, the only way is up. It’s likely that longer-term fixed rate products will grow in popularity as borrowers seek financial stability. 10 year fixed mortgages provide a decade of immunity against rising rates and the average cost is relatively low at just 2.74%, compared to 1.73% for a two-year fix*. However, they often come with early repayment charges if borrowers switch their mortgage deal before 10 years is up. Lenders should therefore offer greater flexibility if they wish to capitalise on the move towards long-term products.”

 

Angus Stewart, Chief Executive of digital start up Property Master, said of today’s Bank of England Monetary Policy Committee decision to raise the base rate:“A rise in base rate has been trailed for quite some time so today’s announcement will not come as a surprise to many.  The economy seems to have recovered its bounce following bad weather earlier on this year and this better economic data has finally forced the hand of the Bank. “

“Our recent July Mortgage Tracker, which follows rates and fees from 18 of the largest lenders in the buy-to-let market, showed that the cost of popular buy-to-let fixed rates deals has continued to fall since the start of the year.

Five-year fixed rate mortgages have been particularly competitively priced with the monthly cost of borrowing a typical amount of £150,000 falling between £11 and £24 compared to the cost if the loan had been taken out in January.  Given today’s news of a base rate rise landlords who are looking to borrow to buy a new property or refinance their existing portfolio may need to move very fast indeed if they are going to benefit from some of the good deals we have seen.”

 

Jonathan Ivory, MD of build to rent operator, Atlas Residential, has also commented on the impact of this rise:“Despite historically low interest rates for almost a decade, home ownership is increasingly out of reach for low and middle income earners due to the widening gulf in the ratio between average incomes and house prices.

Today’s uptick in interest rates will increase the cost of variable and tracker mortgages for millions and hence further enhance the attraction of renting, specifically the ever increasing number of communities that are professionally run and institutionally owned.”

 

Nick Marr, Co-founder of rental marketplace TheHouseShop.com, comments on the impact of the interest rates rise for tenants and landlords:“We were all expecting the announcement of the interest rates rise today, but that won’t make it any easier for mortgage holders and landlords to deal with. Landlords have already been put under immense pressure by a raft of new legislation and changes to the Private Rental Sector over the past couple of years. Many landlords are already feeling the strain on their finances from the Section 24 tax changes and increased Stamp Duty on second home purchases – plus there is the highly likely possibility of an increase in letting agency fees once the Tenant Fees Ban kicks in. Adding to all these existing pressures with a further 0.25% interest rate rise could make it even harder for Buy To Let landlords to maintain their bottom line.”

“Our research from April this year showed that almost 1 in 3 landlords were planning to raise rents in the next 12 months to help cover the increased costs of running their rental business. With the added possibility of mortgage lenders upping their rates – this proportion of landlords could increase even further.”

“Unfortunately, this could mean that tenants end up taking on the cost of the rates rise, as Buy To Let landlords, in many cases, price their rental properties according to their mortgage repayments.”

“Renters are largely unaware of how interest rate rises and tax changes can have a knock-on effect to the amount they pay for their housing. While the supply and demand rules of the market should minimise the potential for any extortionate rent increases, I believe we will see many landlords raising rents by 2-4% in the next 12 months.”

 

Paul Haywood-Schiefer, a Manager at tax and advisory firm Blick Rothenberg, said:“For many people who were getting no return on their capital due to long term low interest rates and decided to invest in buy to let properties this will be another blow.”

“They wanted to get better returns and for many it was also part of their retirement plans.”

“The increase in the Bank of England base rate will have a knock on effect on mortgages for thousands of people.

“Those buy to let investors with mortgages may be some of the worse affected as not only do they have to deal with increased interest repayments, they will also be dealing with the fact that for the current tax year, they will only receive full interest relief on 50% of the cost of interest incurred, with the other 50% only receiving basic rate tax relief.”

“The amount liable to full interest relief will reduce by a further 25% from April 2019 and from April 2020; interest incurred will only attract basic rate tax relief.”

“At the moment this is all new and as buy to let property owners pay tax on the income they earn from this through their tax returns, many of them willnot have yet calculated the position that the reduced interest relief will have had on their profits from 2017/18.”

“Once they see the reduced profits, they could put up rents to ensure their yields, which will be bad news for those renting and trying to save for properties of their own.”

 

MakeUrMove managing director, Alexandra Morris, commented: “Despite there being plenty of good landlords out there who want to keep the impact on their tenants to a minimum, the reality of the situation is that now the Bank of England has raised the base rate, many landlords will find that the increase in their mortgage repayments makes their current financial situation unaffordable, and will be forced to consider rent increases as a result.

“40 percent of the landlords we surveyed earlier this year indicated that the new laws, regulations and tax changes being introduced meant they were already considering increasing rents and 29 percent said a rise in the base rate was their biggest worry in 2018. Clearly, this rate rise is now an added pressure which could be the tipping point that means a large number of landlords decide they have to pass on their additional costs to tenants in order for it to remain viable for them to let their properties.

“The Government are currently sleepwalking into an ever deepening housing crisis and the Bank of England base rate rises are adding to the burden felt by many landlords. This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.”

Bank of England Expected to Raise Benchmark for Interest Rates Tomorrow

Published On: August 1, 2018 at 9:18 am

Author:

Categories: Finance News

Tags:

The Bank of England’s Monetary Policy Committee (MPC) has now discussed the likelihood of an increase to the benchmark interest rate by 0.25%. The MPC will meet tomorrow, at which point it is widely expected that the rate will rise from 0.5% to 0.75%.

Rob Clifford, group commercial director at property specialist SDL Group, has commented on how meaningful an interest rate rise would be for the property market. He said: “Many commentators have pinpointed 2nd August as the most likely date for interest rates to rise from 0.5% to 0.75%. Of course, there were similar predictions back in May, but a combination of continuing Brexit uncertainty, disappointing economic data and a decline in inflation, meant that the ‘dead cert rise’ never materialised.

“There are many competing opinions as to whether an increase will happen this time round. Back in June, the Bank of England MPC voted 6-3 in favour of holding rates. One person switching his vote to call for a rise was chief economist Andy Haldane, which was a significant move. More recently, Investment Week reported that markets are pricing a 91% chance of a rate rise, a figure underpinned by BoE deputy governor Ben Broadbent, who was somewhat combative when questioned about his own vote.

“All of this does not actually highlight 2nd August as precise date though and other data would actually suggest that a rise is still a few months off. Poor retail sales data for June, the falling pound and the collapse of high street names, including Poundworld and restaurant group Gaucho, have all created uncertainty. This has not been helped by the Consumer Price Index either, which in June came in at 2.4%, down on the forecast of 2.6%.

“If I were to nail my own colours to the mast, I would say that a rise in November, or even in 2019, is now more likely than next week. Of course, I may be wrong, just as I incorrectly predicted that Derby County would get promoted. However, regardless of which commentators are right or wrong, it’s important to consider the real impact of all of this on the sector that we work in.

“If we look at my own business, SDL and in particular our Mortgage Services division, we are currently seeing a record number of mortgage applications – up 16% year-on-year. The appetite for mortgages is very much there and shows little sign of abating. The mortgage market is by no means living in the shadow of a looming interest rate rise. Whilst the very threat of an increase does, of course, tend to generate more activity in terms of borrowers seeking fixed rate certainty, it’s important to note that our own increase in business levels encompasses remortgage, buy-to-let and traditional purchase applications.

“Consumers expect transparency and, I have to be honest, a lot of the discussions around rate rises have had undertones of ‘act now’ and some may view that as unhelpful. The reality of the situation is that a rise of 0.25% will be largely insignificant to the typical borrower and should not have a meaningful financial impact. We all know that lenders’ affordability calculations and lending restrictions over the past few years have verged on draconian, and this has meant that borrowers can tolerate some movement in rates without any real threat.

“Whatever the decision of the Bank of England’s MPC, the cost of borrowing is still exceedingly low and is still amongst the cheapest since records began. In many respects, it would be more beneficial for us all if industry commentary switched from the hype surrounding interest rates to the real barriers that are currently impeding a free-flowing housing market – and that is supply and demand and the level of initial deposit required.”