Mortgage Strategy Updates for This Week
Stay informed with the latest mortgage updates. Despite lower inflation, Bank of England rate cuts are not expected soon, and mortgage lending has dropped to its lowest levels since rates started rising. Read more below:
Inflation down but no BoE rate cuts imminent
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) increased by 2.8% over the year to May 2024, down from 3% in April. Monthly CPIH rose by 0.4% in May 2024, compared to 0.6% in May 2023. David Hollingworth, associate director at L&C Mortgages, commented that the drop closer to the Bank of England’s 2% target is positive, suggesting potential for a base rate cut as inflation comes under control.
Mortgage lending at lowest levels since rates began to climb: Octane
While the mortgage market is currently buoyed by remortgaging activity, a significant resurgence in overall market activity is not expected until interest rates begin to decrease. Octane Capital CEO Jonathan Samuels notes that gross lending has declined to its lowest level since the increase in interest rates, primarily due to a reduction in house purchase lending. Recent market analysis by Octane Capital examines changes in gross mortgage lending across sectors quarterly and annually.
EPCs ‘riddled with inaccuracies’: Which?
Which? has called for reforms to energy performance certificates (EPCs), citing them as “riddled with inaccuracies and unhelpful advice.” The consumer body conducted assessments on 12 UK homes built between 1650 and 1999, from one-bedroom flats to five-bedroom detached houses. These tests, introduced in 2007 to gauge energy efficiency for home buyers and renters, revealed inconsistencies that Which? believes should be addressed by the next government.
BoE holds rates at 5.25% despite inflation fall
The Bank of England’s Monetary Policy Committee (MPC) has maintained interest rates at 5.25%, marking a sixteen-year high, in its seventh consecutive decision. With a seven-to-two majority, the MPC opted to keep the bank rate unchanged, while two members advocated for a reduction to 5%. Market analysts anticipate that a decline in inflation towards the Bank of England’s 2% target could bolster confidence for a future base rate cut, as indicated by mortgage market participants.
HSBC raises green cashback offers to top £1,000
HSBC has enhanced its cashback incentives for buyers or investors in energy-efficient homes. The bank now offers cashbacks ranging from £750 to £1,250 for customers who choose its energy-efficient home products. These include properties with an energy performance certificate rating of A or B, applicable to residential, first-time buyer, home mover, and remortgage deals. Oli O’Donoghue, Head of Mortgages at HSBC UK, emphasises their commitment to assisting customers in securing optimal deals amidst their property journeys.
FCA delays publication of politically exposed persons report
The Financial Conduct Authority has postponed its review on the treatment of politically exposed persons until after the general election. Originally scheduled for release by the end of June under the Financial Services and Markets Act, the findings have been delayed to avoid coinciding with the national poll on 4 July.
Metro Bank updates interest only and BTL criteria
Metro Bank has updated its criteria for interest-only and buy-to-let (BTL) mortgages, offering higher loan-to-value (LTV) ratios up to 80% for interest-only mortgages. The requirement for a minimum value when using the sale of the mortgaged property as a repayment strategy has been eliminated, but a minimum of £250,000 must be comprised of equity, capital repayment, or other interest-only repayment strategies.
BoE rate reaction: August cut ‘still on the table’
The Bank of England has opted to maintain the base rate at its 16-year high of 5.25%, citing concerns over service prices and wage growth. This decision disappointed the property industry, though some economists speculate the first rate cut could occur as early as August, contrasting with the November consensus. The Monetary Policy Committee voted 7 to 2 to keep the rate unchanged, a level held steady since August last year, with the last rate cut occurring in March 2020.
Mortgage experts ‘surprised’ by BoE figures on high LTI lending: Lenders Live
Tony Hall, head of business development at Saffron Building Society, expressed surprise at the latest Bank of England (BoE) figures revealing a sharp decline in high loan-to-income (LTI) lending to an eight-year low. Speaking on Knowledge Bank’s Lenders Live, hosted by sales director Shane Chawatama, Hall commented, “I was taken aback by the BoE’s figures because lenders, especially in the specialist and complex sectors, are extending LTIs significantly. In the past few weeks alone, I’ve observed at least two lenders, West One and Clydesdale, offering LTIs of up to 6x income for suitable applicants.”
NatWest cuts new business resi home loans by up to 17bps
NatWest slashed fixed-rate residential offers on various new business home loans by up to 17 basis points starting June 20th. Reductions apply across categories including purchase, remortgage, high-value purchase, high-value remortgage, first-time buyer, shared equity purchase, Help to Buy shared equity remortgage, green purchase, and green remortgage. The lender also extended term end dates for two-year deals to October 31, 2026, and five-year deals to October 31, 2029.
