08 Sep 2013

Mortgage Markets Returning to Pre-Credit Crunch Levels

Mortgage Markets Returning to Pre-Credit Crunch Levels

Allan Gardner, Financial Services Director comments on current mortgage market in Scotland.

Allan Gardner, Financial Services Director comments on current mortgage market in Scotland.

Like the wider economy, there are encouraging signs from the UK mortgage markets, with evidence of increased activity, improving house prices and positive market sentiment.

Increased activity throughout Scotland has seen a higher level of mortgages being agreed than in any similar six month period since early 2008. The key difference from that time though is that borrowers are now applying for loans with reasonably d deposits compared to the halcyon days of 100% lending when banks took all the risks.

The real key to this activity is the first time buyer – who is often the initial link in the buying chain – allowing others to move on and stimulate the entire market. More affordable housing has returned and with interest rates at an all time low the issue of affordability is becoming easier.

There are mortgage rates available at well below 2%  but to access those rates you will have to be able to come up with a substantial deposit. For many home movers though this is not a problem and with a 60% loan to value you will have a great choice of deals if you take the time to speak to an independent mortgage adviser who can access all these deals – sticking with just one lender might be a serious mistake given the cut throat mortgage market we have right now.

Remortgage deals are also looking more attractive when you have a reasonable amount of equity as there are rates available below the standard variable rate which many borrowers are choosing to stay on rather than fix a deal for a few years.

In addition, the buy-to-let market has seen a reduction in rates over the last few years and many landlords are seizing the opportunity to benefit from lower rates and higher values and extend their portfolio of investment properties by remortgaging current loans onto lower rates and releasing capital. As well as this many first time landlords are now able to afford a rental property as rates have reduced and prices stabilised. The rental market in general is still strong as in reality the ability to borrow money hasn't really become any easier. More that deposits have become higher. So there is still a large part of the Scottish public who either cannot afford to buy or are still saving to make that first purchase.

A key fact is that house purchase activity in Q2 was the strongest since Q4 2007 and remortgage activity has continued to pick up from very subdued levels - in fact Q2 saw the strongest performance since late 2011. This all suggests that  that the recent growth in the market looks set to continue. Indeed the Council of Mortgage Lenders estimate that lending through July 2013 is the strongest single month since the autumn of 2008.

At Aberdein Considine our own activity would mirror that of the mortgage market. We have seen very high levels of activity for all our independent mortgage advisers since the start of the year. It still remains a challenge to finally get the funds released as lenders generally have tighter underwriting than they had in 2008 but I am pleased to say we have a very low level of applications which do not reach completion.

These increased activity levels have seen us employ full time mortgage advisers in our new offices in Glasgow, Edinburgh, Bathgate and Livingston along with setting up a specialist team to deal with new build mortgages which by their own right present some different challenges for borrowers looking to buy a brand new house.

In summary it seems pretty good if you are looking to get a mortgage deal right now and you have some capital behind you or you can access a decent deposit from the bank of Mum and Dad  - just be careful you don't settle for anything less than the very best deal for your own circumstances.

Allan Gardner, Financial Services Director

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