The Budget was never going to be a spectacular show, so the mortgage market must pin its hopes on the Autumn statement
Much of the talk and speculation last week centred on Chancellor Philip Hammond’s first Spring Budget. The truth is, it was never going to be a spectacular show laden with effects, especially as Hammond has already moved to make this the final Spring Budget, clearing the way to make bigger changes in the Autumn.
Much of the content was trailed beforehand and the event was all a bit of a damp squib. Yes, there were some good gags (“they don’t call it the last Labour government for nothing” deftly swatting away heckles) but it seemed the humour was trying to draw attention away from the mundaneness of it all.
Housing, stamp duty, white rabbit? Nada, nicht, nought. As the English Housing Survey reveals the level of home ownership has dropped to its lowest level in 30 years, this was surprising. Hopes are pinned on the Autumn Budget.
There was also (deliberately, of course) no real mention of Brexit. What we did get was a procession of figures: GDP growth forecasts up scaled to 2 per cent in 2017; public sector borrowing lower than predicted at £51.7bn; and inflation expected to rise to 2.4 per cent in 2017-18 before falling again in subsequent years.
The big change for all you self-employed brokers out there was the news that Class 4 National Insurance contributions are to rise from the current rate of 9 per cent to 10 per cent in April 2018 and 11 per cent in April 2019.
With the increase expected to raise just £145m per annum, it seems risky to alienate the growing army of self-employed for so little. Indeed, it immediately caused a row over breaking pre-election promises, leading the Prime Minister to hint it will be evened out by the introduction of maternity/paternity pay for that section of the workforce.
There was also a reduction in tax-free dividend allowances for shareholders, from £5,000 to £2,000, to come into effect from April next year. But there was nothing more on booze – so let’s enjoy that.
In the markets, three-month Libor is unmoved at 0.35 per cent, while Swap rates have inched up by a tiny margin.
2-year money is unchanged at 0.59%
3-year money is up 0.01% at 0.67%
5-year money is up 0.03% at 0.84%
10-year money is up 0.02% at 1.22%
In the product world, Ipswich Building Society has made some decent moves this week, offering a two-year fixed at 1.39 per cent up to 75 per cent loan-to-value and 1.55 per cent up to 85 per cent LTV, both with fee-free overpayment up to 50 per cent of the original loan. There is an application fee of £199 and a completion fee of £800.
On the buy-to-let side it has introduced mortgages for transitional borrowers, with rates from 3.19 per cent on a two-year discounted basis and 3.39 per cent on a two-year fixed to 75 per cent LTV. It can now accept remortgage applications from existing buy-to-let borrowers with other lenders via the transitional rules, based upon an interest coverage ratio of 125 per cent of product pay rate.
Also on buy-to-let, Harrods Bank has launched its best-ever rates, starting at 3.39 per cent for three years fixed and 3.49 per cent for five years fixed, with a 1.25 per cent fee for higher loans, and rent calculated at the pay rate at 125 per cent.
Precise also has its lowest five-year fixed buy-to-let mortgage, at 3.39 per cent up to a loan size of £2m, and Aldermore has cut its rates too, by up to 0.5 per cent on residential products. Its buy-to-let five-year fixed to 75 per cent LTV now stands at 2.98 per cent with a 2 per cent arrangement fee.
In other news, Metro Bank has made some criteria changes and now allows interest-only to 75 per cent LTV. The minimum property value for downsizing as an option has reduced to £600,000 from £2m, and it will accept 100 per cent of bonus income averaged over the last two years.
Finally, Halifax has made the helpful move of now allowing valuation appeals on remortgages where it affects the rate or loan amount, as long as you have comparable evidence, and NatWest is launching in Northern Ireland. I know there have been calls for more lenders to lend there.
Andrew Montlake is director at Coreco