Catch up on Mortgage Strategy’s most popular stories this week. Economy cooling fast but rates likely to rise again and the Post Office and Bank of Ireland end joint mortgage services. Read more below:
Economy cooling fast but rates likely to rise again: Hargreaves
With the Bank of England considering another interest rate hike, concerns arise as the economy experiences a rapid downturn. Hargreaves Lansdown’s Susannah Streeter notes the interest rate measures are effective but cause unintended consequences, leading to a significant decline in economic activity. The current scenario fuels expectations of an impending mild recession, as the business landscape reacts to the swift rate increases.
Post Office and Bank of Ireland end joint mortgage services
The Post Office and Bank of Ireland UK have ceased offering mortgages and unsecured personal loans under the Post Office branding due to a new agreement between the companies. While these specific services are discontinued, the firms emphasize that they will still offer various products, including easy access cash ISAs, junior ISAs, instant saver accounts, and growth bonds, catering to customers who either cannot or prefer not to transact online. Notably, existing customers with Post Office-branded mortgages and personal loans remain unaffected by this change.
Leeds Building Society launches ‘reach’ mortgages
Leeds Building Society has introduced Reach Mortgages, a new suite of mortgage products designed to make home ownership more accessible. These fixed-rate mortgage options cater to eligible customers with smaller deposits, especially those whose credit scores may not qualify for the Society’s standard mortgage products. The initiative aims to provide pathways to home ownership for individuals who might face challenges in this regard, such as first-time buyers.
Falling house prices could lift mortgage payments by £2,000 a year
A potential 10% decline in house prices next year might result in hundreds of thousands of mortgage holders moving into higher loan-to-value (LTV) brackets, leading to an average annual repayment increase of £2,000, warns a Bank of England blog. If house prices sharply drop, high LTV spreads could rise by 100 basis points, causing approximately 350,000 mortgage holders to surpass an LTV of 75%, resulting in higher bills. The blog suggests such an outcome could significantly impact the economy. Authors Fergus Cumming, Deputy Chief Economist at the Foreign, Commonwealth and Development Office, and Danny Walker from the BoE’s Deputy Governor’s Office, highlight these potential consequences.
Latest Halifax figures point to resilient market
The latest Halifax House Price Index reveals a 0.5% increase in average house prices for November, following a 1.2% rise in October. On an annual basis, property prices decreased by 1%, a notable improvement from the 3.1% decline reported last month. The average cost of a UK home is now £283,615, approximately £1,300 higher than the previous month. South-east England continues to experience the most significant downward pressure on house prices.
Average UK fixed rates continue to fall: Rightmove
According to Rightmove’s weekly mortgage tracker, average mortgage rates are on a continued decline. The average five-year fixed mortgage rate has dropped to 5.11%, down from 5.36% a year ago. Similarly, the average two-year fixed mortgage rate is now 5.52%, compared to 5.61% at the same time in 2022.
Kensington Mortgages completes £548m residential mortgage deal
Kensington Mortgages has successfully concluded a £548 million residential mortgage-backed securities transaction. This involved securitizing loans that exclusively comprised recently originated, high loan-to-value (LTV) loans for owner-occupied properties. Kensington, a specialist mortgage lender, has been absent from public securitization markets for the past two years.
Nationwide cuts resi rates by up to 31bps, Halifax by as much as 25bps
Nationwide Building Society is set to reduce rates on selected fixed-rate loans, with cuts of up to 31 basis points across two-, three-, and five-year fixed terms, starting at 4.29%. Halifax also plans to reduce prices on selected offers by up to 25 basis points. Nationwide’s updated rates include reductions of up to 26 basis points for new customers moving home across two-, three-, and five-year fixes up to 95% loan to value.
Mortgage lending ‘remains weak’ in Q3: UK Finance
Mortgage lending in the third quarter of the year remained weak, with a 26% decrease in home moves compared to a year ago, according to UK Finance data. The ongoing contraction in house purchase lending is attributed to cost-of-living pressures and higher interest rates, posing a significant barrier to mortgage affordability. The Household Finance Review by the banking trade body suggests that the final quarter of the year is expected to show further contraction.
TSB intros first-time buyer loans from 4.64%
TSB is set to introduce a range of first-time buyer products starting at 4.64% from December 7. The suite includes two-, three-, and five-year fixed-rate loans, along with a two-year tracker deal. After the fixed-rate term concludes, customers will transition to a reduced follow-on tracker rate of 2.49% above the base rate, currently standing at 7.74%, instead of the existing TSB homeowner variable rate of 8.74%.
