Rob Clifford is chief executive at CENTURY 21 UK and a Director at Moneyquest
Back in 1957 the then Prime Minister, Harold MacMillan, at a speech in Bedford said: “Let us be frank about it: most of our people have never had it so good.” Over the years a shorthand version of this, “You’ve never had it so good”, has entered both the political and wider lexicon and is often used to suggest something of a disconnect between those in leadership positions and those who work at the ‘coalface’.
In the current financial climate, particularly in the UK mortgage market in recent months, I’ve often thought of the phrase, “You’ve never had it so good”, when reading about falling inflation, record-low BBR, mortgage price wars, and so on. The underlying assumption appears to be that, because lenders are cutting mortgage rates – especially at lower LTVs –borrowers and potential borrowers are experiencing a once in a lifetime opportunity.
Is this truly the case? For some borrowers – notably those with 40% deposits or equity – rates are certainly eye-wateringly low. Indeed, just as you think they can’t be cut further, another lender gets out its pricing scalpel. But, just how accessible are these rates? Let’s not forget that the MMR has frustrated the route to a mortgage approval for many applicants – I suspect that various individuals who seek lending into retirement, or are self-employed or contractors, or are unable to remortgage away from their current SVR, might disagree with the ‘never had it so good’ sentiment. In the round however, the landscape is positive in the extreme: our Moneyquest business, for example, had a record breaking year in 2014.
One important component of ours and many broking businesses is the first-time buyer fraternity. The good news is that 2014 may have been a watershed moment. As the latest CML lending data recently revealed, 311,500 advances were made for house purchase, up 15% on 2013, with the loans totalling £45 billion – a substantial 24% year-on-year increase. Very good news and the fact that we have seen an increase in the number of low-deposit products now available to first-timers is also a huge fillip to them. The Government’s Help to Buy 2 scheme has certainly played a part in boosting the market and lenders outside the scheme are also much more committed to offering high LTV products.
I was intrigued to see some research recently from Genworth/Moneyfacts on its LTV Tracker Index which shows that average rates for high LTV products are also coming down. But what was extremely interesting was the cost for first-timers over the life of a special deal. Those who could only stump up a 5% deposit were likely to be paying (for a £150k property) £8k more (in mortgage payments) than those who could push to a 25% deposit. For those taking out the 95% LTV product that’s a monthly mortgage payment £340 more expensive than the equivalent 75% deal. It’s perhaps no wonder that first-timer buyers are still far fewer in number than the historical averages.
The positive is however that this situation is a whole lot healthier than 18-24 months ago when wannabe first-time buyers had very slim pickings when it came to products with 10% deposit or less. At that time it was 20/25% or nothing - the market has come a considerable way since then. But there is much more to be done and, given that Help to Buy 2 is due to end in just over 22 months’ time, will it be possible to maintain the extensive product choice in the absence of Government stimulus?
So, while low rates are clearly a welcome part of today’s mortgage market for those borrowers who qualify, we need to continue to keep an eye on the bigger picture across all LTV bands and all criteria. No-one is suggesting that lenders relax affordability measures – as their revision was absolutely necessary given the fallout from the Credit Crunch – but as some lenders have acknowledged themselves, there was a post-MMR overreaction. With almost a year’s experience under their belt in the new regime it’s good to see sense prevailing and a more predictable landscape for consumers.