What is the state of the mortgage market after a year of COVID?

Like all markets, the mortgage market has not avoided the impact of coronavirus. A year after the start of COVID we see what we can learn from the last twelve months.

The availability and variety of mortgage products saw a fairly dramatic decrease throughout 2020. Many lenders withdrew deals from the market when the first impacts of the pandemic were felt in the UK. The hardest hit were high LTV (loan-to-value) mortgages. Deals that require a 5% or 10% deposit are considered higher risk for lenders. This left first time buyers with little choice, if any. Those with plans to remortgage using a small deposit also found themselves with fewer options.

Existing homeowners

For existing homeowners on a standard variable rate, mortgage repayments may well have fallen over the last year. The average SVR on the 1st of March 2020 was 4.90%.  One year later on the 1st March 2021 the average SVR sits at 4.41%. Borrowers may seek to reduce these monthly repayments further by switching to a fixed rate deal, however it is entirely possible that remortgaging in this way could be out of reach for some consumers depending on how their circumstances have been impacted by COVID.

Deal availability

In the last few months, we have seen an increase in available mortgage products. As of February 2021 there were 3,215 mortgage deals available. In comparison to March of 2020 when 5,222 deals were on the market, it may seem relatively low, however, it is the highest number since and indicates a trend of expanding options. This is particularly good news for first time buyers, as the largest rise in deals of late is on mortgages with a 90% LTV ratio. This display of willingness to lend out higher risk offerings can be viewed as an indication of confidence in the mortgage sector. With Sunak’s budget outlining a government guarantee scheme for lenders as well as extending stamp duty holidays, this too should lead to an increase in the availability of high LTV ration mortgages.

The mortgage market, as ever, boasts fluidity.


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