uk mortgage market

New Year Positives for the Mortgage Market

With the new year now in effect and people feeling the impending stamp holiday deadline looming, some positive sunshine for those looking to find avenues for a new home in 2021 is poised to break through the gloom, especially if you’ve been keeping an eye of the UK mortgage market.

Brighter Outlook for Homebuyers

The Bank of England has set about reviewing the affordability tests that are imposed on borrowers in an effort to open avenues of relaxation of rules that were introduced in 2014. In this period, a series of stress tests were introduced by the Bank as a way to avoid borrowers suddenly being unable to pay their debt with the advent of significant interest rate increases.

Though at the time a product of the credit crunch, these tests are currently set to be under review as to how they are calibrated. The focus is on taking into account the so-called reversion rate, levied by mortgage lenders following introductory periods, which is now at a much lower level than its 2014 period.

The rate was called into question in the current era, where the Bank of England base rate is extremely low.

Plans in Motion

The Financial Policy Committee pointed out that consistent with the above factors, option-implied distribution of the future interest rates highlights lower probabilities of a 300 basis points rise over 2014.

What this means is that household capacity to be able to pay the debt is of a higher likelihood when supported over prolonged periods of lower interest rates in comparison to 2014. This review will also fully examine how household income changes and unemployment plays towards mortgage affordability.

Back in October of 2020, the Prime Minister called for action towards easier affordability of mortgages with the focus to aid first time buyers get a solid foothold on the property ladder, including those with very small deposit savings to achieve. The relaxation of stress tests was also on the agenda as well as calls for 95% loans in a motion which labelled low-deposit mortgages as “revolutionary” in its inception.

The Prime Minister has also motioned that work with the government is underway with lenders to execute new long-term fixed-rate mortgages that are actionable with 5% deposits.

Relief on the Horizon

This comes as a sigh of relief to those looking to buy property in Stockport, as well as those currently sweating the deadline of the stamp duty holiday. With the advent of yet more tier system restrictions and a possible national lockdown again on the horizon, people are desperate to find their new residence as soon as possible to avoid lockdown blues in housing that has outgrown their needs.

This also provides a bright outlook for those currently struggling with the decision on how to sell a house in the current climate with uncertainty surrounding the UK mortgage market.

This news is a bright light in an uncertain new year and those looking for the best guidance on buying, selling or renting a property can talk with the team at Joules Estate Agents today, for a future with the premier independent estate agents in Stockport.