The current climate: Is it hot or cold?


What’s the outlook for the housing and mortgage market? Paul Dignan of TSB offers an expert insight and also explains how the bank is helping tenants to make the switch to homeownership

Following an extremely subdued end to last year – when Christmas could not have come soon enough – the green shoots so desperately needed have slowly emerged throughout the first quarter of 2023.

Whilst the Intermediary Mortgage Lenders Association (IMLA), a trade association for lenders, predicts the market to fall to £265bn this year – down 14.5% – activity levels have remained resilient, with first-time buyers driving the house purchase sector.

Mortgage interest rates have also bucked the trend. According to Moneyfactscompare, on 30 December 2022, the average fixed rate was 5.79%, however swap rates – which have been in freefall until recently – have since driven competition between lenders, with the availability of five-year fixed rates falling below 4%.

And house prices, which some believed would fall by c.10% this year, have risen month-on-month, by 0.2% in January and 1.1% in February.

So, are things ‘going back to normal’? Well, I am afraid not. If anything, the last decade could be described as abnormal, with house prices rising exponentially and the availability of exceptionally cheap mortgage funding.

Having become acclimatised to this low-rate environment only makes the current financial conditions feel more challenging.

The cost-of-living crisis continues to impact mortgage affordability and in reflection of the UK inflation rate continuing to fluctuate, making every penny count is crucial, now more than ever.

As mortgage providers continue to search for solutions to help borrowers, lending criteria has never been more innovative, with an array of options becoming available across the market to assist with both mortgage affordability and the quandary of raising a deposit.

Opportunities for tenants

Whilst we can be optimistic about the mainstream mortgage market, the future of the buy-to-let sector is less certain.

Rising interest rates, combined with demanding tax conditions make this segment of the market increasingly unattractive, particularly for amateur landlords.

This, in conjunction with proposed regulation stating that any newly-rented property in England and Wales will be required to have an EPC rating of C or above from 2025 onwards, and any existing tenancies following suit by 2028. Indeed, some landlords will certainly be considering the difficult decision to sell up.

At TSB, if a tenant has been subject to a tenancy agreement on a property for a minimum of 12 months – and if their landlord is willing to grant them a 10% discount – we will allow them to purchase the property on a concessionary basis without the requirement of them funding a deposit.

As well as allowing the tenant to own their property, there will be no marketing costs for their landlord to bear in selling the property – the value of which is likely to have increased since it was originally purchased – and there will be no vacant periods whilst they attempt to sell it.

Good news for landlords who would a like a quick sale, whilst also helping new buyers borrow well.

Paul Dignan is national account manager at TSB 

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