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Rates fall, doors open: more good news for buyers and landlords

By Sophia Wood-Burgess

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Earlier this month, we published an article on changes in mortgage rates, and what this could mean for homebuyers with an eye on London property. We’ve already got an update.

There are multiple 5-year fixed rate mortgage products below 4%. That itself is big news. Factor in the potential impact of easing buy-to-let rates, and we’ve got real opportunity to get pent-up buyer and renter demand moving again.

Headline news:

For home seekers – High Street mortgage lenders are taking action once again, and the competition between them is helping reduce the price of fixed rates. Read on…

For investing landlords – MT Finance is the latest to announce cuts to their entire BTL product range, following Santander, Accord and Aldermore’s lead. Read on…

Is it time for buyers to fix?

London house prices remained strong through economic uncertainty in 2023, which contributed to the confidence coming into the 2024 market.

It is going to be difficult to predict exactly what happens next. However, Richard Merrett, Managing Director of our partner mortgage firm, Alexander Hall, can shed some light on the situation:

The status of variable and fixed rates.

Richard explains that variable rates are driven more by the Base Rate, set by the Bank of England. Fixed rates are driven more by swap rates, which are set by the market’s predictions. These swap rates have, on the whole, been going down so there have been mortgage rate reductions as lenders gain confidence in the market, hence fixed rates are where you’ll see the most change right now.

Whether you fix, stick with a variable rate or wait to enter the market depends on your goals and your gamble (playing the market to find the lowest rate is always a bit of a gamble).

According to Richard, there is strong potential for buyers to find the right deals for their situation right now, especially if they have a trusted advisor with access to the best range of products.

Rates may come down again marginally, or they may not. Is the opportunity that might come more appealing than the opportunity you have now? Only you, your advisor and time can tell.

What to look out for when you’re making your decision:

• If you’re switching from a variable rate, check the terms. Some have an exit fee.

• If you’re a new buyer, pay attention to the product or arrangement fee.

• With the longer-term outlook quite positive, it could be the time to take a shorter-term deal to allow flexibility to review in 2-3 years if rates have come down as expected

More movement in the market

The other big story for buyers and sellers is around mortgage affordability tests. These tests, which happen when a buyer submits their mortgage application, had gotten quite strict in 2023 due to the repeated interest rate increases.

Just to show how that affected the market, plenty of first-time buyers’ applications stalled because they couldn’t pass the affordability test, so those sellers who depended on first-time buyers couldn’t make their moves either.

Along with lowering mortgage rates, affordability tests are becoming slightly more tolerant, which will remove a hurdle for buyers and sellers and bring more confidence into the market. Many of the lenders offering greater flexibility on affordability are smaller or more specialist, so again, access to a great adviser is crucial in helping you find the best mortgage option for your requirements.

To the top

The lettings story we should all be following

The property sales market has been the focus of the mortgage story, but a reduction in buy-to-let rates could be a big deal for a lot of Londoners.

Many buy-to-let landlords have struggled with steep increases in rates in the past year. There wasn't much in the way of good news to entice landlords to add to their buy-to-let portfolios. The increasing costs and lack of stock remain huge factors in rent prices rising, even if demand falls.

So, if buy-to-let rates ease the pressure on landlords, the lettings market may swing back into more of a happy medium, and we may see more opportunities open up to rent in London – something that’s been severely lacking in the market lately. That would be big news.

Time for landlords to fix?

Playing the mortgage market is tricky at the best of times, and advisors are quick to remind landlords that they’ll need to consider product fees, so we absolutely recommend talking to an expert, like the Specialist Lending Team at Alexander Hall.

The questions for landlords here are 'how much more will rates fall?' and, crucially, 'when?'.

Many experts are pointing to the next few years, so is a two-year fixed rate the way to go? Or maybe you’ll stick with a tracker to see what happens with the Base Rate this year. Perhaps you want a more generous affordability test, so you can splash out on a desirable London property with a steady, reliable income at a rate you can manage – then, you’ll be looking for a 5-year fix.

Key takeaways

Whatever you choose to do, you can start by making a plan with a mortgage advisor. They will keep an eye on the market for you, lay out your specific options clearly and help you take whatever action you find best. Contact Alexander Hall, our trusted partners in the mortgage market, for a free consultation.

If you want to take advantage of the great news to start something new, register on My Foxtons, find your local office or browse our available properties.

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