As Mortgage Choice Declines, Importance of Advice Increases

While the mini-boom in the housing market continues with pent-up demand from buyers for more space, combining with the stamp duty holiday, one of the biggest problems they may face is trying to get a mortgage. The number of mortgage deals available has fallen, according to research from Money facts, with 54 per cent fewer products on the market compared with this time last year. Last October, there were 4,955 products to choose from; how there are just 2,259.

Unsurprisingly, given that the number of mortgages available has fallen so significantly, average rates have also risen. The average two-year fix rose by 0.14 per cent in October, while the average five-year fix also rose by 0.13 per cent, although those requiring higher loan-to-values (LTVs) have seen the sharpest rise in rates.

Indeed, many lenders will not lend at all above 85 per cent LTV because they are concerned about borrowers finding themselves in negative equity should property prices fall once the full economic impact of the pandemic is felt. This is making life difficult for first time buyers in particular, with many having to call upon the Bank of Mum and Dad for even bigger deposits in order to get on the property ladder. Research from Legal & General shows that a third of those looking to buy in the next five years hope to get financial assistance from family or friends.

Those with larger deposits or similar levels of equity in their home will find that mortgage availability is more plentiful at competitive rates. These borrowers are regarded as being relatively low risk so are more appealing to lenders as the risk of them defaulting on their mortgage payments given the uncertain economic environment is less of a concern. For those with a 40 per cent deposit, two-year fixes are available from 1.17 per cent while a five-year fix is available from 1.34 per cent.

With more limited choice available, advice is more important than ever and this is where a whole-of-market broker such as AWS Financial Services can help. We will look at your individual circumstances and find the right mortgage for you. Please get in touch for more information.

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