The Current Housing Market – A Tale of Two Halves:

There are understandably a lot of questions around the housing market at the moment. And most of these have to be answered with philosophical reassurance that what is meant to be, will be. That is little consolation though to those living through trying to move house during a global pandemic. So, if you are thinking about moving imminently, hopefully this article will be helpful. It’s designed to offer a small insight into the current housing market and what you can expect.

The current housing market

Homeowners with equity to speak of and first-time buyers are having particularly different experiences at the moment. Cash-rich borrowers have access to mortgages seemingly getting cheaper by the day. Meanwhile, those who are trying to buy their first property with small deposits have very few options. General economic uncertainty and rising unemployment has seen 95% loan-to-value (LTV) ratio deals shelved by most lenders. Some 90% deals are still available. However, the increased deposit requirements have scuppered the plans of many first time buyers who have been saving and expecting a different deal. Moving the goalposts to the tune of thousands of extra unexpected pounds simply isn’t a possibility for many.

90% LTV deals are not only thin on the ground. Since last March they have also become expensive. The appetite to lend to buyers with a 10% deposit, or less, is no longer what it once was. According to an analysis by Moneyfacts, where there were 779 products available at 90% LTV in March of 2020, by June there were only 56.

We must also ask the question of whether those who can afford these deals want to take the risk of falling into negative equity should inflated house prices fall once the stamp duty holiday comes to an end in March of 2021. Should a buyer choose to take on one of the few available mortgages, they don’t come cheap. Before the first lockdown the average two-year fixed rate mortgage at 90% LTV had an interest rate of 2.57%. That figure has risen to 3.76%, making the deals less attractive.

The current housing market for homeowners looking to remortgage, or who have a 40% deposit

The story for homeowners who are looking to remortgage, or those who can put down a 40% deposit or equivalent equity, is much more positive. It’s possible for people in this position to find lower interest rates than were available before the pandemic. If you’re in the market for a 60% LTV mortgage on a two year fixed-rate deal, before the first lockdown you would have been looking at an average rate of 1.8%, this has subsequently fallen to 1.77%.

As the picture of the future stability of the economy and the longer term impacts of Covid-19 on the housing market become clearer, perhaps these stories will change. But, for now, if you have any queries or concerns surrounding the topic, please don’t hesitate to get in touch!

Written by Alex Welsh

Alex is a Resolution-accredited, Chartered financial adviser. Having joined the firm in 2012, he has extensive knowledge of all areas of financial planning.

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