Those looking to secure a new mortgage are experiencing problems as lenders struggle with demand and deal with pandemic-related staff absences.
Mortgage lenders are finding it hard to cope with the excess demand for their products as buyers try to complete on their house purchase before the stamp duty holiday ends on March 31.
Stamp Duty Holiday
The Stamp Duty Holiday and pent-up demand has caused a boom in the property market. As a result, lenders have seen an increase in the number of people applying for their mortgage products. Lenders approved 104,969 loans in November 2020 — the highest of any month since August 2007 and a 7,700 increase on the total for October.
Mark Harris, the chief executive of the mortgage broker SPF Private Clients, said: “Lenders are navigating a fine line between the need for volume and market share versus risk appetite and service, and that has led to lots of chopping and changing in the market.”
Experts anticipate that competition between lenders will remain fierce until the end of the stamp duty holiday which applies to properties with a purchase price below £500,000.
Interest rate gap
The interest rate gap between average two-year and five-year fixed rates fell to 0.17 percentage points this week, the lowest since June 2013, as lenders competed for business. The average rate for a two-year fix is 2.52 per cent compared with 2.69 per cent for a five-year fix. The average gap in 2020 was 0.27 percentage points, in 2019 it was 0.36 percentage points and in 2016 it was 0.64 percentage points.
As we head into February, it is likely that many of those who instructed solicitors before November 2020 will try to complete before the 31 March and as a result, mortgage companies will remain busy.
If you are looking to purchase or re-mortgage, it might be worth leaving this until April when mortgage companies may have more staff available to help you secure a new mortgage.
In the meantime, it is worth engaging the services of a solicitor, who can help guide you through the conveyancing process.