What’s happening in the mortgage market?
In March 2020 the Bank of England made two emergency cuts to the base rate, The cut from 0.25% to 0.1%, made in response to the coronavirus pandemic, means the base rate is at its lowest level in the Bank’s 325-year history.
In the immediate aftermath of this reduction, banks and building societies withdrew some of their mortgage products.
Among the most common deals to be pulled were tracker mortgages and loans for people borrowing a high percentage of their property’s value.
The number of different deals available has continued to fall in April, dropping from a total of 3,192 mortgage products at the start of the month to 2,548 now.
The good news is that lenders that had pulled products are beginning to launch new deals for both fixed rate and tracker mortgages.
Eleanor Williams, finance expert at Moneyfacts, said: "It’s very positive that we are beginning to see providers return products to their ranges and launch new deals, including some in the higher loan-to-value sectors.
"These changes may be an early indication that lenders have begun to adapt to the exceptional economic and operational changes of recent weeks in order to continue supporting their customers, and that hopefully more providers will be following suit in the days ahead."
How much choice is there if I'm looking for a new mortgage deal?
While the number of deals available has continued to fall since the beginning of April 2020, there are still more than 2,500 different mortgages to choose from.
Choice is widest for people with large equity stakes in their homes or big deposits to put down, with 541 different mortgages on offer for people looking to borrow 60% of their home’s value and 520 for those borrowing 75%.
What if I only have a small deposit or equity stake?
Unfortunately, choice for people looking to borrow a high proportion of their home’s value has been more affected.
The number of deals for people with a 5% deposit has dropped from 162 at the beginning of the month to 55 now.
The situation is slightly better for people with 10% to put down, with 127 different loans available, although this is significantly lower than the 326 deals available on 1 April.
Even so, there are still a variety of different deals for borrowers to choose from, while new offers in this space are being launched all the time. For example, HSBC introduced a new tracker deal for people borrowing 90% of their home’s value last week.
In short, if you need to remortgage but have only a small equity stake in your home, you should not be put off from doing so.
What is happening to mortgage rates?
The good news is that mortgage rates are falling in response to cheaper borrowing costs for banks and building societies themselves.
The average cost of a two-year fixed rate mortgage has fallen from 2.36% on 1 April to 2.13% now, while the cost of a five-year fixed rate deal has dropped from 2.66% to 2.37%.
Rates have fallen across the board, not just for borrowers with large equity stakes in their properties.
In fact, one of the biggest reductions is to the cost of an average five-year fixed rate loan for someone with just a 10% deposit, with this dropping by 0.61% since the beginning of the month.
Is it a good time to remortgage?
Although there are fewer mortgages than before the market was impacted by coronavirus, there continues to be a good choice for borrowers.
It is also expensive for homeowners to sit on their lender’s standard variable rate (SVR), the rate people typically revert to when their existing deal comes to an end.
The average interest rate charged on an SVR is currently 4.61%, compared with an average of 2.13% on a two-year fixed rate deal.
As a result, someone with a £200,000 mortgage would save nearly £3,240 a year by switching from their lender’s SVR to a new deal.
What should I do if I need to extend my mortgage offer?
While mortgage offers are normally valid for three months from when they are made to when borrowers draw down the funds, lenders have agreed to extend this period for an additional three months in light of the current property market conditions.
If you need to extend your mortgage offer because your house move has been delayed due to the current lockdown, you should contact your lender and tell them about your situation.