Are we in a Mortgage Price War?

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There’s a new deal at LESS than 1% and new 95% loans for First-Time Buyers…

However, borrowers still face a grilling. It has been reported that Hinckley & Rugby Building Society will launch a two-year discount variable mortgage 0.99%, while the rest of the lenders have released a state-backed 95% mortgages which went live Monday 19th April. However, this could spark a mortgage price war.

0.99% vs 95% Mortgages

Stephen Kerrigan, Mortgage Advisor based in Doncaster has said that a surge in offers is a vote of confidence in the housing market and the economy as the UK emerges from Lockdown, and that [Hinckley & Rugby’s] new deal underlines an ‘encouraging environment.’

How this money can help?

Pitching for that competitive, high-quality, low-LTV clientele that lenders like have on their books to lower the overall risk of their lending proposition. However, most lenders are returning to the 95% mortgage market with rates of around 4%, but Stephen Kerrigan, Doncaster mortgage advisor believes competition will this down.

This in turn will lead to lower rates on lower LTV products. This is because if there is little difference between the rate on a 90% and 95% mortgage. For example, borrowers will simply plump for the higher LTV offer to get a bigger deposit. Although, Stephen Kerrigan says all eyes will be on whether lenders start bringing back rates below 1% on fixed-rate mortgages.

Loyalty Costs £1,000 a year

Around three million loyal mortgage customers are at risk of being overcharged by up to £1,000 a year each. In fact, citizens advice found that 42% of borrowers whose fixed-term mortgage ended since the start of the first lockdown had not switched to a new deal, which meant they will have been automatically rolled onto their lender’s standard variable rate, costing more.
One in five borrowers said the switching process was too time consuming or difficult. In theory, lenders will always contact customers before fixed-rate periods end.

Mortgage Availability has improved in Three months

For the first time in three months, mortgage availability has improved but is still expected to rise further thanks to a reduction in mortgage rates, an increase in high LTV mortgages and an easing of credit criteria.

Stephen Kerrigan also said this

It’s great to see rate competition within the mortgage market but it is vital borrowers compare the overall true cost of any deal.

Competition can prompt other lenders to become more confident and react with their own deals to entice borrowers. However, there are now 110 deals that offer 95% mortgages available to borrowers, including 38 under the government guarantee scheme.