It’s been another busy month for the mortgage market, with house price growth showing no sign of slowing.
The Office for National Statistics (ONS) reported a rise of 4.7% in UK average prices in the year to September 2020. Prices reached a record high of £245,000, the ONS said, and may have been buoyed by the Stamp Duty holiday on properties costing up to £500,000 and pent-up demand following the first lockdown.
Here, we look at some of the recent changes to the mortgage market which might affect those hoping to move or remortgage.
Changing housing preferences
The pandemic may have prompted homebuyers to re-assess their housing preferences, according to data from the Office for National Statistics, with signs that growing numbers are favouring detached properties rather than flats and maisonettes.
The average price of detached properties rose by 6.2% in the year to September, with the prices of semi-detached homes up 5.1%. In contrast, the average price of flats and maisonettes rose by just 2.0% over the same period.
It’s thought that detached homes may have seen the biggest increase because more of us are working from home than ever before, prompting many buyers to seek out more living and outdoor space. Research by homebuilder Barratt found that one in three of those expecting to continue working from home between three or five days a week are more likely to move home than they were before the pandemic.
Those who think they’ll be working from home the most are happiest to compromise on a longer commute for more space, with workers spending more than three days a week at home more prepared to move as much as an extra hour away from their workplace.
More options for borrowers with smaller deposits
First time buyers with small deposits have had a limited range of mortgage options available to them this year, with many lenders withdrawing their deals for those borrowing 90% or 95% of the property value.
Accord, however, has become the latest lender to return to this end of the market, having re-launched its 90% mortgage deals. Accord has previously offered 90% mortgages but typically on a temporary, time limited basis but has now reintroduced them into its core range. There are options available for both purchases and those looking to remortgage, which is useful for those hoping to move up the property ladder but who don’t own a significant amount of equity in their current home.
Nationwide re-enters interest-only market for purchases
Nationwide Building Society is offering homebuyers the chance to arrange part or all of their mortgage on an interest-only basis, having re-introduced this option for remortgages earlier this year.
Nationwide withdrew its interest-only options eight years ago, and only re-entered the interest-only remortgage market in April. It has now expanded its interest-only mortgage range to include purchases.
The building society’s interest-only mortgages, which are only available through brokers, will be on offer to those with at least a 40% deposit to put down, or the equivalent amount of equity in their homes if remortgaging. Customers must agree that their repayment strategy will be the sale of their home at the end of the mortgage term.
Anyone applying for an interest-only mortgage with Nationwide will need a minimum income of £75,000 for sole applications, or £100,000 if buying or remortgaging with someone else.
Market update November 2020