Craig Calder: A pre-Budget review

Craig Calder: A pre-Budget review

Craig Calder is director of mortgages at Barclays

At the time of writing, we sit on the cusp of a delayed Budget and something of a cabinet reshuffle.

With this in mind, I thought it would be an apt time to focus on how the current housing and lending landscapes are shaping up in the lead-up to any tax changes and/or spending cuts/hikes.

House prices

Housing market momentum continues to build ahead of the spring moving season, indicating that there is likely to be a series of new price records in the coming months.

The latest Rightmove House Price Index for February outlined that the average price of property coming to market rose by 0.8% (+£2,589) in February, just £40 short of a new all-time high.

Upwards price pressure is being driven by a post-election release of pent-up housing demand, and while there is a long-awaited and welcome recovery in the number of new sellers coming to market, this is being outstripped by a surge in demand from buyers.

These figures bode well for a busy spring period as it appears that there is some renewed confidence in the air amongst buyers and this is being reflected in the number of mortgage applications being seen by lenders across the board.

Lending figures

Data collected by UK Finance showed that mortgage completions saw annual increases across all sectors in December.

The data showed that there were 29,490 new first-time buyer mortgages completed in December 2019, 0.3% more than in the same month in 2018, while homemover mortgage completions rose 3.2%.

There were 16,820 new remortgages with additional borrowing in December 2019, 5.9% more than in December 2018. For these remortgages, the average additional amount borrowed in December was £50,702. There were 16,490 new remortgages with no additional borrowing in December, 0.5% fewer than in December 2018.

These figures demonstrate the current optimism attached to the mortgage market and there is little to suggest that this steady forward momentum will not continue throughout 2020.

Expected lending growth

In its latest ‘EY ITEM Club Outlook for financial services’, EY predicts some relatively subdued growth for the mortgage market despite the General Election result, clarity on the first stage of Brexit and a rise in mortgage approvals.

It suggested that overall mortgage lending growth is forecast to rise 4.1% this year and 3.9% in 2021, which is close to the average of the last five years and well down on pre-financial crisis rates.

The report says that despite historically low interest rates and accommodative loan-to-value ratios, affordability remains a key challenge for prospective homebuyers.

In Q3 2019, the average house price was equal to 4.7 times the average borrower’s income – close to a record high.

Affordability and LTV’s

Affordability is a word which continues to cause concern for borrowers, but it’s also evident that improvements are being made.

While housing affordability has remained relatively unchanged, mortgage affordability has vastly improved in recent times, although that’s not to say it’s easy for all homebuyers and this is why mortgage market growth will remain steady rather than spectacular.

In terms of lending, the availability of mortgage deals for borrowers with a 5% deposit or equity is suggested to have risen over the past year. Research to be published in the Moneyfacts UK Mortgage Trends Treasury Report found that the average five-year fixed mortgage rate on a 95% LTV was 3.78% in February 2019, while the current average rate is 3.52%.

Meanwhile, the 2-year average fixed rate on a 95% was 3.41% in February 2019, but currently sits at 3.22%. In addition to this, there are currently 405 deals in the 95% LTV chart, its highest level since May 2019 when there were 413 products available.

This rise in product numbers is the highest in any month since May 2019 when there were 413 deals available, which coincided with the Bank of England’s Prudential Regulation Authority (PRA) warning over the rise in risky lending practices.

All of which underlines the positive, and responsible, steps being taken by the lending community to offer more borrowers access to a range of highly competitive mortgage products, even at those higher LTV bands.


Data released by Knowledge Bank suggests that the most searched for criteria in the residential market, once again, was the maximum age lenders will allow at the end of the mortgage term. This suggests that borrowers in 2020 are continuing to look at extending their mortgages into retirement.

Given the demographical needs of the UK population, it’s hardly surprising that later life lending continues to come under the spotlight.

This is a market which is evolving from a complexity, risk and regulatory standpoint to command greater attention from policy makers, lenders, intermediaries and borrowers.

And this makes it a product area that all responsible lenders will be monitoring closely over the course of the next 12 months and beyond.