Is Now the Right Time to Get a UK Mortgage?

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According to industry insiders, lenders are striving to attract customers to their mortgage products, and will continue to over the coming months.  For buyers – now really is the best time to take out a mortgage in the UK.  This softening of the mortgage market follows a period of tightened lending conditions, which in its turn was a consequence of the stricter banking regulation introduced in the country to tackle the fallout of the global financial crisis. But this austerity is apparently over, and now major banks are falling over themselves to win business with borrowers.

Two of the UK’s biggest banks in particular, HSBC and Barclays are offering extremely competitive rates to buyers. Barclays is launching three fixed-rate products: a three-year mortgage at 2.29%, a five-year one at 2.85%, and a ten-year mortgage plan at 3.49%. The offers are for 40% deposits and carry a fee of £999. At the same time, the bank will temporarily cut its interest rates on lower deposit deals.

HSBC, for its part, is offering borrowers with a 40% deposit an interest rate of 0.99%, a significant discount on its standard variable rate (SVR) of 3.94% that is applicable over a two-year period. According to The Guardian, even if the lender decides to revise its SVR upwards before the two years are over, the borrowers who have signed up for this offer would still pay less than the standard rate.  In the fixed-rate segment, HSBC is offering 1.49% annually, again for a period of two years, but the fee is higher than Barclays’, at £1,999.

These are just two instances of the developments on a market that is coming back to life, and, according to the Bank of England, competition is set to intensify in the remaining months till the end of the year. According to the central bank, interest rates below 2% will become even more widespread. The driver behind these developments is market share. After new regulations that imposed strict affordability rules on mortgage lending came into effect this spring, banks and building societies were pushed to curb the extent of their offering in this segment.  People were reluctant to borrow, even with the Help to Buy government scheme, so lenders lost even more market share. Yet the scheme did one good thing for sure — it led to the expansion of low-interest mortgage products and, hence, intensified competition.

The situation, as it is now, is especially positive for people looking to take out a mortgage and then rent out the property. Providers of buy-to-let mortgage products are reducing their fees significantly in order to win business in a market that is literally crowded with such offers. In October, landlords could choose from more than 700 separate buy-to-let products, a record-high number. In that, they seemed to be favouring longer-term deals, with five-year fixed-rate offers making up nearly a fifth of all deals.

Though borrowing rates in the country are nothing like the pre-crisis levels, it all points to an optimistic future, in the short term at least. The UK housing market has yet to get back on its feet, with people still uncertain about whether they could afford to buy a home, but the time seems ripe for investors in real estate.

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