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Mortgage agreements jump but consumers are 'exhausted' – how to prepare for summer changes


Mortgage figures were released by the Bank of England today, in the Mortgage Lenders and Administrators Statistics for the fourth quarter of 2020. The data showed a surprising amount of resilience within the mortgage scene.

“But not everyone is enjoying this boom. If you need a mortgage with a high loan to value, deals are thinner on the ground than they have been at any time since 2007.

“In this context, you can understand why the government decided to step in and offer guarantees for high LTV mortgages.

“Meanwhile, arrears are starting to grow. Let’s not get ahead of ourselves, arrears are still incredibly low: right now they’re at 0.93 percent compared to 3.64 percent in early 2009. However, during the pandemic millions of borrowers have been able to rely on payment holidays, so have been able to avoid paying without running up arrears. Now that support is winding down, anyone who’s still struggling is running out of road.

“When the FCA asked people in October, 19.6 million expected to be struggling to pay the bills or service their debts by April. By the time we get the March figures, arrears could look much worse.”

Paul Stockwell, the Chief Commercial Officer at Gatehouse Bank, also welcomed the results and noted demand could rise further into the summer, potentially creating backlogs for lenders: “The value of new mortgage commitments has hit a 14-year high, propelled largely by homeowners who aspired to move to bigger properties while under lockdown restrictions, and who quickly capitalised on the stamp duty incentive when it was announced last summer.

“Their activity meant the annual growth rate for these new mortgage commitments nearly quadrupled in the final quarter of 2020.

“The stamp duty extension announced in the Budget last week will help to ensure many of these mortgage agreements carry through to completion and gross mortgage advances in the first three months 2021 are likely to be strong.

“It’s becoming evident that the stamp duty holiday’s stay of execution will mean sustained high levels of mortgage activity through to the summer as another busy house hunting season gets underway now that schools are reopening and the weather is improving.”

Lenders themselves also appear to have embraced optimism in light of the Government’s changes, with analysis from moneyfacts.co.uk showing mortgage availability grew for the fifth consecutive month in March with 3,532 products being on offer, the highest number seen since March 2020.

Despite this, Elanor Williams, a Finance Expert at moneyfacts.co.uk, also noted these conditions may not last much longer, as lenders have been known to restrict their generosity: “Growth in choice is positive but average rates have risen alongside the uplift. The two-year fixed rate for all LTVs at 2.57 percent is the highest since June 2016 while the five-year equivalent has now risen to 2.75 percent, up 0.01 percent year-on-year and the highest since November 2019.

“Those now searching for a new mortgage or progressing an application, in light of the extension to the stamp duty holiday, may do well to secure the advice and up to date market knowledge of a qualified adviser.

“Mortgage product shelf life has plummeted to just 26 days after a rally last month, so providers are clearly amending their offerings in light of a changing economic environment and would-be borrowers may need to move quickly once they have decided on the best deal for their circumstances.”

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