The past few years have been challenging for the property market and mortgage lenders. The uncertainty in the market has been bad for everyone, and even though there is hope the Boris Bounce will improve matters throughout this year, there is still a need for caution.
One area which is expected to remain problematic is the level of pressure placed on mortgage pricing. The competitive nature of the market has led to many lenders making commercial decisions that benefit applicants, but which has led to profits tumbling for many mortgage lenders.
At the end of November 2019, the average mortgage rate for a ten-year fixed mortgage was at 2.76%, which is a record low. For close to half of 2019, the average two-year fixed rate has sat below 2%, and the rate for five-year fixed-rate mortgages declined throughout the year.
There is an acceptance lenders are under pressure
The Chief Commercial Officer at broker firm John Charcol, Luke Somerset, said; “Most of the significant news in mortgages in 2019 has related not to economic or political uncertainty, but the ongoing pressure on margins for lenders. Some big names have been forced to throw in the towel in 2019 with the likes of Tesco Bank withdrawing their mortgage range. This pressure is likely to continue into 2020 and beyond.”
Of course, while there will be some lenders concerned about the future, at this point, there is a lot to be said for borrowers finding a suitable and appealing mortgage. However, with so many options to choose from, it is vital first-time buyers review their options carefully. Some mortgages look attractive at first glance but upon closer inspection, are not as welcoming as first thought.
Buyers should seriously review their options
There are many attractive mortgages to choose from, but the main takeaway for the rush of buyers entering the market in 2020 is that not every option is the same. It is likely that buyers will ask friends, family members and colleagues for guidance on which mortgage is right for them. It is suitable for buyers to ask these questions, but the mortgage which is best for a friend or colleague, may not be the best fit for the buyer themselves.
It is best to speak with an experienced broker who can review a buyers’ circumstances, and best determine what mortgage products they have access. By filtering out unsuitable mortgages, it becomes easier to evaluate the suitable options and to select a solution which is of the most significant value.
While some people believe Brexit will influence the 2020 property market, Mr Somerset doesn’t believe this will be the case. He thinks it is “widely assumed” the markets have already considered the impact of Brexit, and therefore, no one should expect anything too exciting to happen which would impact on swap rates. He also indicated the Bank of England has room for flexibility if the economy requires a leg-up.