It is therefore no surprise the property market generally still remains an attractive investment opportunity for buyers, despite political turbulence. And London is its own unrivalled ecosystem.
We’re seeing more enquiries for properties in affluent areas such as Chelsea, St Johns Wood, Notting Hill and Marylebone vs less in outer London areas such as Ascot, Windsor and Beaconsfield.
High value market impact
The first quarter of 2023 saw the markets calm from the post mini Budget storm seen at the back end of last year. This has had a positive knock on to the high-value mortgage space and high-net-worth (HNW) product availability.
Despite interest rates rising to 4.25 per cent in the most recent Bank of England (BoE) Monetary Policy Committee (MPC) meeting, swap rates – which have a strong correlation to mortgage fixed rate pricing – have remained stable for most of this year with two-year swaps just over four per cent and five-year swaps at 3.85 per cent at the time of writing.
It is also expected that the BoE will deliver two further rate rises before the end of Q2, therefore plateauing around the 4.75 per cent mark instead of the previously forecasted 4.50 per cent. Despite arguments that suggest we may not see any sizeable rate cuts until some point in 2025, swap rates continue to bounce around.
No doubt the industry will concur that mortgage rates have begun to drift down, with a number of lenders offering five-year fixed rates at sub four per cent. We have seen the same reflected in the large loan and private bank space, and interestingly also seen more and more lenders looking to target this market place.
Readjusting affordability
As well as positives on the mortgage rate front, as margins on current rates are so minimal for lenders, we’ve seen several positive criteria changes being made as lenders look to maintain volumes via this route. Several lenders have increased the loan to incomes for higher-earning clients, with up to 5.5x loan to income available for income over £100,000 now available from some prominent lenders.
We are also seeing affordability calculators improve the maximum borrowing amounts for more affluent clients as inflation calms and lenders look to take more variable income into account.
High street expanding into high net worth
In the large loan and HNW market, the property market is holding strong. LDN Private Clients have certainly seen lenders looking to increase their focus in this area. More high street banks and building societies are expanding their offering into bespoke, large loan underwriting departments solely for loans over £1 million in alignment with private banks.
All lenders within the private client space are looking to sharpen their pencil on rates and increase flexibility to clients that do not fit the normal mortgage affordability criteria but where strong assets can be evidenced. As such we are finding that the maximum borrowing, and also the flexibility of the terms offered, has really improved this year to HNW clients.
HNW Mortgages
In the private client landscape, borrowers looking to opt for a high value mortgage facility with interest-only payments to ease the burden of higher servicing costs will see an increased number of product options available. In terms of housing stock, we have seen the return of best and final bids with sellers having multiple offers at the table. The lack of stock available is seeing fierce competition in many areas across PCL (Prime Central London).
Within LDN Private Clients, we have also seen a number of lenders opening up their service by offering a bespoke underwriting team to intermediaries. With more products available, clients are taking advantage of retaining their wealth portfolio by effectively using borrowing to purchase property in their desired neighbourhood.
