It is sometimes said that statistics are the equivalent of a lamp post – they provide the support, not the illumination.
With headlines shouting one minute that the number of first-time buyers is rising and the next that confidence is heading south, it can be difficult to work through the figures, claims and surveys to extract what it all means for potential buyers. Added to much speculation about future rises in interest rates, for many intermediaries, the attention has turned to the issue of how affordable mortgages may be, both now and in the future.
Amid the uncertainty, the situation is likely to benefit brokers as more customers seek the support of intermediaries to help them find the most affordable and appropriate deal for their circumstances.
The idea of buyers being priced out of the market has gained a degree of traction, with a slew of news headlines relating how the proportion of younger buyers is at a noticeable low and the likelihood that they will be priced out of owning a home if property prices continue to rise.
In fact, the picture is more positive. If assessing affordability as the proportion of monthly mortgage payment to gross income, the figure is 19 per cent, a shade under the historical average of 21 per cent, according to the Council of Mortgage Lenders.
This is due in part to the long-term low base rates and thus low mortgage rates. But it is also due to borrowers opting for longer-term fixed rates to ensure certainty of payments at a time of uncertainty over when rates will start to rise. It is likely that the drive to secure longer-term fixes will become an increasingly popular choice.
Affordability has been the focus also of wider attention with recent guidance from the Bank of England’s Financial Policy Committee requiring all lenders to apply a stressed rate above base rate of 3 per cent and a restriction on the percentage of new lending above 4.5 times gross income. This has led Nationwide to make mortgage affordability criteria changes that include a 6.99 per cent stressed rate and a 4.75 per cent loan-to-income cap.
Stress testing must be good for all concerned. It gives consistency to intermediaries and the extra comfort that mortgage payments are a longer-term known quantity, with customers able to absorb interest rate increases that are moving ever closer. Any increase in rates may put additional pressure on some borrowers to meet their commitments so the Bank of England announcement of new measures to moderate potential risks in the mortgage lending market was welcome.
With so much information available and some of it apparently conflicting, it is no surprise that increasing numbers of buyers of all kinds are turning to brokers for advice on securing the best fixed deal. It seems that without the necess-ary means of illumi-nation, that lamp post is not much use at all.