Top Mortgage Strategy News: What You Need To Know This Week
Stay ahead of the curve with this week’s essential mortgage updates. Discover how Keystone’s finalisation of a significant £560m buy-to-let deal could impact the market, and learn about the Bank of England’s decision to maintain rates and its potential impact on your clients. Gain the insights you need to make informed decisions:
Exclusive: Keystone completes £560m buy-to-let securitisation
Keystone Property Finance has finalised its largest-ever securitisation, valued at £560m, as it strategically plans for the future. Named Hops Hill No.4, this securitisation comprises buy-to-let loans originated by the specialist lender, with a prefunding of 15%, indicating that a portion of the loans are already in the pipeline. Notably, it incorporates loans from Keystone’s initial securitisation, Hops Hill No.1, issued in January 2021, which will be called this month, resulting in the full redemption of outstanding bonds.
The Bank of England’s Monetary Policy Committee (MPC) has maintained interest rates at 5.25% for the sixth consecutive time. Despite expectations of rate cuts in the UK and Europe in the coming months, economists generally anticipated the MPC’s decision to hold rates steady for now. This decision is influenced by persistently high inflation, currently at 3.2%, exceeding the Bank’s 2% target.
BoE rate preview: All eyes on its inflation forecast
The Bank of England’s rate-setting body is poised to maintain interest rates at 5.25% for the sixth consecutive time during its upcoming meeting on Thursday. Stronger wage and inflation data have shifted expectations, reducing the likelihood of a rate cut this summer. According to Deutsche Bank, a 7-2 vote is anticipated for holding the rate steady, with deputy governor Dave Ramsden and external member Swati Dhingra favoring a base rate reduction. Deutsche Bank predicts the first 0.25% cut to occur in June, a view shared by HSBC, followed by two additional cuts in September and December.
Arrears continue to rise in Q1: UK Finance
UK Finance’s latest arrears and possessions data reveals a slight uptick (3%) in homeowner mortgages in arrears, totaling 96,580 in Q1 2024, compared to Q4 2023. This increase is attributed to ongoing cost of living pressures and elevated interest rates. Meanwhile, the number of buy-to-let (BTL) properties in arrears held steady from the previous quarter, remaining at 13,570.
Skipton BS 100% LTV loan attracts £91.5m of applications in a year
Skipton Building Society’s contentious 100% loan-to-value mortgage has garnered £91.5m in applications since its launch a year ago. The mutual’s Track Record loan enables tenants over 21 with a “strong track record of rental payments” to borrow the entire property cost on a five-year fixed rate, with a maximum term of 35 years. Scotland leads in product adoption, with 15% of applications, followed by the North West at 14% and the South East at 12%. The average nationwide property purchase price stands at £152,015.
Mortgage and rent costs rise, leasehold ‘burden’ lifts: Barclays
Mortgage and rent payments increased by 3.6% in the year leading up to April, according to data from Barclays, marking an end to the earlier slowdown observed in the first quarter of the year. Despite this uptick, housing costs still fall below the 12-month average of 6.5%, suggesting a positive trend over the longer term, as indicated by the analysis of millions of customer accounts conducted by the high street bank. However, Barclays highlights that service charges and ground rent hikes have emerged as “an unexpected burden for many affected homeowners.”
Barclays cuts resi deals by up to 39bps
Barclays implemented reductions on selected two- and five-year residential purchase-only fixed-rate deals starting on May 8, with decreases ranging from 14 to 39 basis points (bps). The high street bank’s reductions applied to two-year fixes at 85% Loan-to-Value (LTV), with a £899 product fee, which dropped by 24bps to 4.99%, two-year fixes at 85% LTV, with no product fee, which decreased by 39bps to 5.18%, five-year fixes at 85% LTV, with a £899 product fee, which declined by 14bps to 4.78%, and five-year fixes at 85% LTV, with no product fee, which fell by 18bps to 4.95%. These adjustments coincided with the upward movement in rates by many major lenders, as money markets predicted a potential delay in the first Bank of England base rate cut to the second half of the year.
Barclays relaxes limited company contractor lending criteria
Barclays has implemented a series of criteria adjustments aimed at easing its allowable income rules for limited company contractor borrowers. The updated policy states that affordability can now be calculated using the day rate for up to 90% Loan-to-Value (LTV). Additionally, the bank will accept more than one shareholder, provided that all applicants collectively own 100% shares. Furthermore, each applicant is permitted to have more than one contract. These changes reflect the ongoing efforts of lenders to attract borrowers by adapting various lending policies.
BoE rate reaction: ‘Moving in the right direction’
The Bank of England has maintained UK interest rates at 5.25% for the sixth consecutive time, with Governor Andrew Bailey expressing optimism about the country’s trajectory. This stance has left the mortgage industry anticipating a potential rate cut from the base rate’s 16-year high during the summer rather than waiting until autumn, reflecting the central bank’s improved inflation forecast. The Bank’s rate-setting Monetary Policy Committee voted 7-2 to hold rates, a slight shift from the 8-1 vote at its previous meeting, as it works to reduce inflation from 3.2% to its 2% target.
Mortgage rates on six-month rollercoaster ride: Moneyfacts
Interest rates for home loan borrowers have experienced significant fluctuations over the past six months, according to data from Moneyfacts. Since the beginning of November, the average two-year fixed rate has decreased from 6.29% to 5.91%, while the average five-year fixed rate has dropped from 5.86% to 5.48%, as reported by the data firm. However, these average rates have shown an increase from 5.80% and 5.39%, respectively, in the last month.
