Growing mortgage product choice shows growing confidence in aspects of the housing market, even before anticipated rate cuts.
That’s the view of Octane Capital chief executive Jonathan Samuels who says "that during the second quarter of this year, first-time buyers benefited a 7.7% increase in the number of mortgage products available."
Buy to let landlords have also seen a considerable increase in mortgage product availability, with a 6.2% increase in the last three months, also up 2.5% since December. As a result, buy to let mortgage products now account for a fifth of all products in the current market.
Home movers (5.6%) and remortgagers (3.2%) have also benefited from a quarterly uplift in product availability, with both segments of the market also seeing substantially more choice versus the end of last year, with respective increases of 10.8% and 9%.
Samuels says “we’re yet to see interest rates fall despite inflation now seemingly under control, but given the prolonged period of economic uncertainty that has enveloped the nation and the Bank of England’s cautious approach in managing it, it’s no surprise that it’s been deemed too early to cut rates. The good news is that since the base rate has been held at 5.25%, a greater degree of stability has returned to the mortgage sector and the wider property market. As a result, lenders have been increasing the number of products available to all buyer segments and this greater level of choice not only benefits buyers, but demonstrates confidence in the market.”
Call for Labour to create life-long fixed-rate mortgages
A left-wing academic is suggesting that the new UK Labour government should emulate the US and introduce life-long fixed-rate mortgages.
Some 90 years ago then-US President Franklin Roosevelt created the Federal Housing Administration sought to boost home ownership and encouraged lenders to fix interest rates for the duration of the loans, typically 25 or 30 years. These long-term fixed-rate loans were often guaranteed by the government as part of the ‘New Deal’ and so created a culture of competitive long-term loans without variable interest rates.
Now the UK academic Richard Murphy - on his Tax Research website - argues that something similar should be created here, by the new Starmer government.
He criticises the Bank of England for making home owners on variable rates mortgages “pawns in the game of supposedly controlling inflation” through interest rate rises. He disputes whether rate changes are effective in that attempt to control inflation, and says “why is it that in the UK we don't have what is available in the USA, which is a mortgage with a fixed interest rate for its entire life?”
He continues “Labour could demand this from UK banks. It could make the offer of such a mortgage at a sensible interest rate a condition of the banking licence, which every bank must have as a condition of trading. In other words, it can impose this requirement on every bank, building society or other company that provides mortgages in this country. So that a person or family taking out this obligation will know forever what they have to pay, and will never be caught out in the way that millions have been as a consequence of the unnecessary imposition of high interest rates by the Bank of England over recent years.”
Housing market braced for end of first time buyer stamp duty relief
An estate agency’s research shows a regional breakdown of how the first time buyer market could change if the new government does not continue the current first time buyer stamp duty relief.
First-time buyers currently pay no stamp duty on homes priced up to £425,000 and while Labour have committed to keeping this rate of stamp duty relief fixed for the time being, the party has made no commitment to extending it beyond the deadline that falls at the end of March 2025.
This suggests that when this deadline does arrive, the level of stamp duty relief afforded to first-time buyers will revert back to the previous threshold of homes up to £300,000.
GetAgent’s analysis of current market listings shows that across England, 66.5% of all homes listed for sale currently come in below the stamp duty-free threshold of £425,000. However, just 45.6% are listed at £300,000 or less, meaning that should stamp duty relief revert back to this threshold, it would reduce available stock by 20.9%.
Sales in the East of England could face the toughest challenge should first-time buyer stamp duty relief end. Currently 66.8% of all homes listed for sale are priced at £425,000 or less, whilst just 41.1% of for sale stock sits at £300,000 or below, meaning that it would reduce stamp duty free stock availability for first-time buyers by 25.7%.
The South West (-24.9%), South East (-24%), West Midlands (-21.4%) and London (-19.1%) could also see a drop in first-time buyer market activity as they rank within the top five regions that would see the largest reduction in stamp duty free for sale stock at the £300,000 threshold.
A GetAgent spokesperson says “FTBs form a core part of market activity and stamp duty free incentives are a big draw when looking to reduce the cost of purchasing. Therefore if the threshold returns to £300,000 it could see agents hit with a significant reduction in demand due to the stock they are able to offer and the number of FTBs it attracts. They can also be preferable to sellers and agents alike as they offer a chain-free purchase which can help transaction speed, certainty and of course, cash flow.”