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Mortgage product bounce back stalled in June – Moneyfacts

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  • 29/06/2020
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Mortgage product bounce back stalled in June – Moneyfacts
The number of additional mortgage products coming to the more market in June has flat-lined, analysis has showed.

 

Product availability plunged by 2,656 between March and May as the UK and property market was in lockdown, according to Moneyfacts.co.uk.

Between May and the beginning of June lenders started to widen choice by adding 244 deals to the market.

However, this trend has not continued during the rest of June.

Lenders have been particularly cautious around reintroducing higher loan to value (LTV) mortgages.

Eleanor Williams, from Moneyfacts.co.uk, said: “The recent product count fluctuations have been mainly focused around the higher-risk, higher loan-to-value (LTV) tiers which can be explained by a number of possible factors.

“There has been an overwhelming level of demand from borrowers seeking products in these sectors, leading to some lenders who had relaunched offerings needing to pull them back to ensure their workload could be managed.

“The potential for negative equity issues should house prices slump is now also a spectre.

“This will be especially disappointing to first-time buyers where there are a limited number of products available to those with a smaller deposit at a time where savings rates fall to new lows.”

After the Bank of England cut the base rate twice in March to an unprecedented low of 0.10 per cent, average mortgage rates have fallen.

The typical Standard Variable Rate (SVR) has reduced by 0.42 per cent since March.

At the same time, the average two-year fixed rate has dropped by 0.45 per cent and the average five-year fixed deal has seen a cut of 0.51 per cent.

It means borrowers sitting on an SVR stand to save even more, with the difference between an average two-year fixed deal is now 2.50 per cent.

Williams added: “The mortgage market has experienced a raft of changes over recent months, as the industry has adapted to the continuing effects of the coronavirus pandemic, which has impacted operational capacity across this sector.

“Many households too have suffered interruptions or reductions in their household income, and so as the first batch of consumers who took a three-month payment holiday from their mortgage see this come towards an end, they may wish to find out what the picture looks like now…

“The last few months have been challenging for both mortgage providers and for borrowers alike, however, both have shown a willingness to be flexible in light of difficult circumstances.

“Lenders have an appetite to lend and keep the mortgage sector moving, which is a vital contributor to the UK economy. The demand for products from borrowers has in some areas been overwhelming and further change may be required on both sides as the aftermath of the pandemic becomes clearer. “

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