How the mortgage market has fared one year on from start of COVID-19 pandemic
This month marks the one-year anniversary of the Bank of England base rate cuts and the start of the first UK lockdown.
Moneyfacts analysed how the mortgage market landscape has changed a year on and predicts what could lie ahead for the market.
Mortgage product availability fell dramatically last year, limiting choice for first-time buyers or those looking to remortgage with a small deposit.
Product volumes are slowly returning according to Moneyfacts, but 5% deposit deals are still few and far between.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers sitting on a standard variable rate mortgage may have seen their repayments fall in light of the two base rate cuts seen in March 2020, but they could stand to save much more by switching to a fixed rate deal.
“However, the impact of the coronavirus may have made it difficult for some consumers to move their mortgage, some may even be mortgage prisoners if their circumstances have changed drastically due to the pandemic.
“Mortgage availability was hit hard during 2020 and there was more caution adopted by providers with regards to their lending criteria, however the sector to see the biggest shake-up was for borrowers with a small deposit.
“Lenders pulled mortgages aimed at borrowers with a 5% deposit and even now this area of the market only caters for specific types of consumers.
“Lenders’ reservations to offer low deposit deals trickled into the 10% deposit market, but thankfully over the past few months we have started to see lenders return, giving first-time buyers and borrowers with limited equity some hope.
“Consumers who may be in the process of getting a new deal or hope to buy a property will no doubt be cautious of any fundamental changes to taxation rules and mortgage availability in the months to come.
“The mortgage market remains fluid and so it is always wise to seek out independent advice to keep abreast of any movements, even if consumers don’t plan to make any decisions quite yet.”
Moneyfacts data shows that average rates on standard variable rates could fall from 4.90% in March 2020 to 4.41% this month.
Average rates on both 2 and 5-year fixes could increase from 2.43% and 2.74% in March 2020 to 2.57% and 2.76% this month respectively.