Market Update for November.
Interest rates have started to reduce for mainstream lenders and specialist lenders, with cost of borrowing reducing over time they now feel confident to pass those savings on. We currently have more stability, and overall the Autumn statement has been positive as well. Good news for us property investors.
Also, there are no longer issues with product availability. There were recent product limitations due to uncertainty in the market, but pretty much all lenders are back to operating 100% capacity again.
Mortgage stress tests are also something to be aware of if you’re not charging the market rent. We are limited to how much rent we can charge due to the rent freeze for existing tenants, but if you’ve got a new tenancy in place, make sure you’re charging the market rent. The stress tests are higher than they were previously because a lot of the new rates available are higher than previous stress tests. That’s something to bear in mind as it could limit the amount of mortgage you would get for your buy to lets. Variable rate, tracker rate and discount rate mortgages are also becoming more popular, with more lenders now offering them.
The benefits of these products is often they come with either low exit fees or no exit fees. So you can potentially remortgage to another lender if you want to. Some are also offering a switch to fix rate, so you can take a tracker rate product out with them and then move over to a fixed rate mortgage with that same lender without paying any exit fees.
And they are pricing at today’s rates rather than having to price in that future volatility of interest rates going up potentially. That’s why fixed rate mortgages are higher. The market has to slow down, and one of the things that we’ve seen from the lending point of view is that lenders are starting to ease their criteria again, which is good news for us to reduce some of the rates as well, because as they start to see that dip in mortgage applications coming through, they’re going to want to become more competitive as well. So overall, good news for property investors.
If you are re mortgaging a property, you really want to look at getting in contact with your advisor at least six months prior to your mortgage end date. It’s just a review of what options are available as some lenders allow you to fix a product or select a product up to six months in advance.
Even if they don’t, then you can at least review which options are available and then diarise when you can actually remortgage that property.
A common question we get asked is that what are other clients doing?, for our remortgage clients, we are contacting them typically about seven months prior to their mortgage, having a review to see what they want to do in the future. If they’re looking to remortgage, capital raise or sell that property.
If they are eligible with certain lenders and if the rates are higher than what they want to pay just now. And we’re keeping an eye on products as well as some products are reducing, while other products are going up as well. So, we are constantly keeping an eye on that for our clients.
Some people are going for on the variable. tracker and discount rate mortgages and maybe want to take a short term mortgage with a view that if the situation gets better in a couple of years time, then they might take a longer term fixed rate mortgage, whilst other clients are happy to just have that stability just now and go for a longer fixed term mortgage.
As you can see it’s really dependent on your circumstances.
And if that’s something that you want to have a chat about, then please feel free to get in touch.
Thanks for reading.