Mortgage costs fall again during second quarter of 2018

Michael Lloyd

July 17, 2018

home sales

The cost of mortgages has continued to fall for the second successive quarter with cost reductions for the most popular 2, 3 and 5-year residential mortgages, Mortgage Brain has found.

The cost of a 2-year fixed mortgage to 90% loan-to-value for example is now 8% lower than it was in April 2018, and offers borrowers an annual saving of £576 on a £150,000 mortgage.

The same product with a 60% LTV now costs 3% less than it did at the start of April, as does the lowest rate 90% LTV 5-year fixed rate product at 2.19% as of 1 July 2018.

Mark Lofthouse, chief executive of Mortgage Brain, said: “With fresh predictions for interest rates to rise again next month, the landscape could once again be on the verge of change, if and when, we revert back to seeing a period of increases in the cost of residential mortgages.

“As before though, most predictions imply that the increases will be low and gradual so dramatic changes shouldn’t be seen short term.

“Our latest data is still showing a number of good deals for first time buyers and those looking to remortgage but with possible changes on the horizon, the picture might look different at the end of the next quarter.”

With a current rate of 1.44%, the cost of a 2-year tracker (80% LTV) is now 2% lower than it was over the same period, while a 60% LTV 3and 5-year fixed are both 1% lower than they were in April.

Mortgage Brain’s longer-term analysis also showed that the residential mortgage market is still in a healthy position compared to this time last year, with cost reductions being recorded for the majority of mainstream products over the past 12 months.

The cost of the 90% LTV 2-year fixed, as reported on earlier for example, is now 10% lower than it was at the start of July 2017. A 5-year fixed (90% LTV) is now 5% lower compared to this time 12 months ago, while a 4% reduction in cost has been recorded for a 90% LTV 2-year tracker.

As the founder of Hip Property, the first FCA regulated platform which aims to make real estate wealth more accessible at scale by turning equity and debt into assets, Kai Peeters believed that the rapid fall of property asking prices should not come as a surprise.

He said: “The atmosphere around property has changed vastly in the last decade, with lifestyles being more flexible and with technological advances getting better each year, the market has to begin to reflect that.

“Additionally, the combination of ambitious marketing values coupled with more sellers listing their properties has created a slump where buying a property is an unreachable dream for many, which directly affects the sellers, as they will ultimately get less for their property, if they can sell it at all.

“On the buyers side the recent statistics show that mortgage lenders are being more picky about who they lend to and alienating first time buyers who need their help the most.

“This problem will continue to escalate until an elegant solution is introduced. Technology and the use of smart contracts can speed up the process as well as eliminate costs such as agent’s fees, brokers or stamp duty making buying more attractive to many.”

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