How to make sense of MORTGAGE MAYHEM
Deals that vanish in an instant. Costs rising while the base rate stays rock bottom. And a logjam to beat the stamp duty deadline. It’s all SO confusing, but here’s...
BORROWERS are facing mortgage mayhem as banks axe deals and hike rates. Major delays also mean homebuyers are at risk of missing out on generous stamp duty savings.
But don’t despair — here Money Mail explains everything you need to know to navigate the chaos . . .
WHY IS THE MARKET BOOMING NOW?
A stampede of home movers looking to cash in on the stamp duty holiday is wreaking havoc on the housing market.
Many are desperate for more space after months of lockdown, and keen to make the most of the tax saving worth up to £15,000.
demand from buyers was already soaring before the property market was temporarily frozen in March and rocketed again when it reopened in late May. Chancellor Rishi Sunak’s announcement in July of no stamp duty on the first £500,000 of purchases completed before March 31, 2021, then threw fuel on the fire.
Last week, official figures revealed house prices had surged in every region in August. But experts warn the rally cannot last now the Government is scaling back financial support for households and businesses.
IS THERE REALLY A HOME LOAN DROUGHT?
AUGUSt was the busiest month for lenders in 13 years, with firms approving more than 80,000 mortgage applications, according to the Bank of England. In a desperate bid to curb demand, overwhelmed lenders are hiking rates and withdrawing deals so often that brokers can’t keep up.
the number of mortgages available has halved since the start of the year, according to analysts defaqto.
the clampdown has particularly hurt those with the smallest deposits, as lenders know that if house prices fall they are at most risk of ending up in negative equity (where they owe more than their house is worth). But even those with down payments of 15 or 20 pc have far less choice than before the pandemic. Many banks have introduced tougher lending rules so that only the most financially secure can get a mortgage.
It means self-employed borrowers, those returning from furlough leave or workers who rely on bonus or overtime income are finding it tougher to get a loan.
Last week the Bank of England warned that all borrowers could soon find it harder to get a mortgage as lenders prepare to raise rates and tighten lending criteria.
WHAT IF I HAVE A SMALL DEPOSIT?
tHE pandemic sent mortgage lenders offering deals to borrowers with a deposit of 10 pc or less running for the hills.
Lockdown restrictions stopped surveyors from being able to enter borrowers’ homes and banks were unwilling to offer more risky mortgages without a valuation.
But even when the housing market reopened, not all banks resumed lending to families with small deposits amid fears that rising unemployment could spark a house-price crash.
One of the few remaining lenders accepting applications from borrowers with a 10 pc deposit, HSBC, was forced to withdraw from the market last month — but said the move was temporary.
tSB, Coventry Building Society and Accord, part of Yorkshire Building Society, run mortgage fire sales where 90 pc deals are made available for one or two days only.
Currently, only one deal is widely available to these borrowers, compared with 16 in April, according to defaqto. this is a five-year fixed rate at 3.99 pc with Metro Bank.
Nationwide is offering a two-year fixed rate of 3.49 pc, or 3.54 pc for five years for first-time buyers. But they must prove at least 75 pc of the deposit has come from their own savings, ruling out deposits gifted entirely by parents.
Regional building societies, including darlington, Cumberland, Stafford Railway and Buckinghamshire are offering families with local postcodes a 90 pc mortgage.
And tipton & Coseley has joined Barclays by offering 100 pc deals to borrowers whose parents agree to deposit savings or have a mortgage-like charge placed on their own properties. Borrowers with specific professions are also being offered 90 pc deals.
teachers Building Society will accept applications from teachers with a 10 pc deposit, while Reliance Bank will support key workers such as NHS staff, police and postal workers.
tSB is offering first-time buyers with a 15 pc deposit a more flexible affordability assessment to increase their chances of being approved for the loan. the bank’s five-year fixed rate is 2.99 pc.
WHERE ARE THE BEST RATES?
Rates have risen for all but those with the biggest deposits since the beginning of March.
Borrowers with a 10 pc deposit are now facing the highest rates since 2015.
Average two-year fixed rates have risen from 2.57 pc to 3.76 pc since the beginning of March, according to Moneyfacts.
this means a £150,000 mortgage would cost £2,256 more in interest over two years, excluding fees, than it did at the start of the summer. But for families with a