Whether you’re a first-time buyer, a second stepper, a homeowner looking to remortgage or a buy-to-let landlord, 2019 looks set to be a rollercoaster of a year.
With uncertainty around Brexit and the prospect of further base rate increases, being proactive with your finances and getting the best mortgage deal could be a new year’s resolution that saves you thousands of pounds in the course of 2019.
We’ve analysed market activity in the past year and identified emerging trends in order to bring you our predictions for the 2019 mortgage market.
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A brighter future for first-time buyers?
The 95% mortgage battle will continue
When it came to mortgage rates, buyers with small deposits had a rough ride for a few years, but now the tide is turning.
The number of 95% deals also increased, with banks becoming increasingly competitive in their bid to win new mortgage customers.
And with signs that other parts of the mortgage market are continuing to get more expensive, 2019 could see even greater competition at 95% LTV, and even better deals for first-time buyers.
- Find out more: 95% mortgage calculator
100% mortgages could make a return
In some parts of the country, would-be homeowners struggled to build up even a 5% deposit and in November, the Building Societies Association encouraged its members to be more innovative in their approach to first-time buyers.
The return of 100% mortgages would be highly controversial, but it would be wrong to rule out the possibility of it happening in 2019.
It’s likely that if lenders do launch 100% deals, they’ll be limited to certain professions or will only be available to people with the likelihood of significant inheritances.
The number of higher income multiple mortgages will increase
We’re already seeing signs of professional mortgages coming back on to the market, and that trend could continue this year.
While mortgage providers usually cap lending at 4.5 times the combined annual income of applicants, professional mortgages allow borrowers in specific professions (for example, doctors, dentists etc) to take out a home loan at up to 5.5 or even 6 times their salary.
These income multiples are significant due to restrictions put in place by the Bank of England, which limit how many mortgages can be granted at more than 4.5 times an applicant’s income – a level it considers ‘risky’.
- Find out more: mortgage-borrowing calculator
The leasehold lending crackdown will continue
Last year, Which? published a major investigation into the leasehold new-build home scandal, and as we enter 2019 the government is continuing to consult on improving the leasehold system.
Amazingly, controversial ground rent ‘doubling’ clauses on leasehold flats are yet to be banned, and some mortgage lenders will theoretically still offer loans on properties containing these clauses.
Indeed, of the 10 biggest mortgage lenders, only Nationwide and Santander have definitively ruled out offering home loans on properties with doubling ground rent.
In 2019, leasehold is likely to remain under the spotlight, meaning more lenders could amend their criteria.
2019 could be a great year to remortgage
For some homeowners, taking the second step up the ladder can be even more difficult than buying their first home, with low wage growth and high house prices creating an affordability gap.
And with uncertainty around Brexit, many homeowners are resolving to stay put, meaning 2019 could be the year of the low-cost remortgage.
Cashback and fee-free deals will rocket
If you’re moving up the ladder, you might be looking to borrow at an LTV of 60-80%, a level that generally offers attractive rates.
The bad news is deals at these levels have become more expensive, and with the possibility of further base rate increases, it seems unlikely that they’ll get cheaper this year.
There is some good news, however. Although they’re now well above their historic lows, mortgage rates still remain attractive, especially on longer-term fixes.
And, with lenders seeing their profits squeezed, chart-topping introductory rates are increasingly being replaced by cashback or fee-free incentives.
Approximately one in five mortgages come with such incentives, and it would be no surprise if that figure continues to rise this year, or if the biggest cashback incentives creep over the £1,000 mark.
- Find out more: finding the best mortgage deal
Longer-term fixes will be a popular choice
If you’re looking to remortgage, now could be a good time to be proactive and ensure you’re on the best deal. Doing so could potentially save you thousands of pounds compared to your lender’s standard variable rate (SVR).
In October, we found that homeowners on their lender’s SVR could be paying as much as £4,000 too much each year.
With more products being launched and attractive rates on offer, five-year fixed-rate deals are becoming more popular, as homemovers and remortgagers look for rate security – but watch out for early repayment charges.
- Find out more: fixed-rate mortgages
‘In-between’ mortgages will become more mainstream
Two and five-year fixed-rate mortgages have long been popular, and the number of 10-year fixes is increasing year-on-year, but don’t be surprised to see more lenders offering deals that fill the gaps in 2019.
Three-year deals have been around for a while, and some lenders are now offering seven-year mortgages as they seek to attract movers who want rate security but are reluctant to fix for a whole decade.
While you shouldn’t bank on 2019 being the year of the four- or six-year mortgage, lenders are likely to continue to diversify the range of deals they offer – so watch this space.
Lenders will offer Help to Buy remortgaging deals
As it stands, the vast majority of Help to Buy remortgaging products require you to pay off your outstanding equity loan, with only a handful of options available to borrowers who aren’t able to pay off the outstanding loan at the time of remortgaging.
With more homeowners coming to the end of their fixed terms this year, a growing number of lenders could launch specialist remortgaging products or extend their ranges to include Help to Buy borrowers in 2019.
Will the buy-to-let landscape finally improve?
It’s been a tough time for landlords, but there could be some good news on the way this year.
Lenders could relax stress-testing
Since changes to affordability tests were introduced in Autumn 2017, it’s been harder for some landlords to get approved for finance, with lenders setting higher interest cover ratios (ICRs) of 145% or more.
This means landlords looking to get a mortgage would need to prove their incoming rent would cover at least 145% of their mortgage payments to get approved for a loan.
More than a year on, some lenders are now relaxing their interest cover ratios, with Tipton & Coseley recently dropping its levels to 125% for basic-rate taxpayers and 130% for higher-rate taxpayers.
This move could be the catalyst for other banks and specialist lenders to amend their criteria in 2019.
- Find out more: buy-to-let mortgage calculator from Which? Mortgage Advisers
Longer-term fixes will be attractively priced
In October, five-year fixes for landlords hit the lowest rates on record, dropping to an average of just 3.4%.
And, as with the residential market, this reflects a trend of longer-term fixed-rate deals becoming more attractively priced across the board.
Some lenders have also begun to offer 10-year buy-to-let fixes, too – another area that could increase in popularity this year.
Fee-free deals will become more common
Buy-to-let mortgages tend to come with higher up-front fees than normal residential products (up to £2,499 in some cases), but an increasing number of lenders are now offering fee-free deals as they look to entice landlords refinancing their portfolios.
In October, Which? found that 21% of buy-to-let mortgages were offered fee-free, and it seems likely that figure will rise this year.
As with residential deals, more than one in five buy-to-let deals now come with cashback of anything from £250 up to a cool £1,000.
- Find out more: buy-to-let mortgages
Your home may be repossessed if you do not keep up repayments on your mortgage.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.