If you believe everything you read in the papers you would be forgiven for thinking that there is not much point in applying for a mortgage at the moment because it is all too difficult. Banks aren’t lending and those that are want blood samples and a charge over your children in order to even think about giving you a few quid.
The good news is that this is actually a myth. There is no mortgage shortage and lenders actually have begun to compete for your business. How else can you explain the new trend of 7 day sales from certain lenders who are offering tracker rates from as low as just 1.99%, (4.0% APR)?
Meanwhile, 2 year fixes are now down at 2.68%, (3.5% APR) and 5 year fixes are available at just 3.89%, (4.1% APR), so from a product point of view this year really does seem like the best time to lock in to a great product.
In fact, according to a report by Moneyfacts, mortgage rates are now the lowest they have been for 23 years, not only due to the expectation that rates will now not change this year, but also because lenders are finding it cheaper to raise funds in the financial markets and have more of an appetite to compete.
Apart from these rate reductions, the interesting thing is the amount of innovation that has re-appeared in the market, with lenders looking to assist on the more difficult transactions. Even at the higher Loan-To-Value (LTV) levels, where we have seen a dramatic increase in products available up to 90% LTV, lenders are now more often than not looking to assist.
Affordability calculations and credit scores have both become more realistic rather than just lax, helping to ensure that the right borrowers are matched with the right loan amounts.
Of course in this new era certain people will still struggle, those with credit issues, looking to stretch income to levels that are just too high to justify and those without at least a 10% deposit. However this is no bad thing and time taken to save for a deposit and rectify past credit mistakes is a good thing.
The biggest real change is around interest only. No longer are those who can only afford the loan on an interest only basis, with no thought about how they are going to pay the loan back, able to do so. Again, this is no bad thing.
The above does not however, constitute a full scale mortgage crisis. More and more we are seeing loans go through in the more difficult areas. So if, for example you have a property above a shop, a property split into 2 or more units or with a short lease then there are some good options.
Alternatively, if you are a borrower looking for high LTV’s on a property above £1m, a buy-to-let for a 1st Time Buyer or a mortgage based on commission income or only one years of self-employment then do not despair.
Whilst things are still tough, they are nowhere near as tough as the press would have you believe.
Lenders are lending and mortgages are available; and at exceptionally low rates.