New mortgage rules could add £19,000 to average house price and help first-time buyers with lower deposits

The Sun

3 days ago

NEW mortgage rules could add £19,000 to average house prices and help first-time buyers get on the ladder with lower deposits.
Changes to stress testing practices could cause property prices to increase by between 5% and 7.5% over the next five years, claims Savills.
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New research by the estate agent also predicts the average deposit needed by a first-time buyer could fall from £58,000 to as little as £45,000 over the same time frame, The Telegraph reports.
Lucian Cook, of Savills, said: 'Change would not be immediate, with the impact on house prices and transactions likely to take place over a period of five years.
'But in the medium to long term, the market would feel the knock-on effect of a widening pool of buyers."
In March, the FCA reminded lenders they are allowed to tweak their stress testing based on market expectations.
It said the market approach to stress testing could be restricting borrowers' access to affordable mortgages.
It comes as mortgage interest rates fall, following drops in the Bank of England (BoE) base rate.
Stress tests are carried out by lenders to see if borrowers could cope with an uptick in their interest rate or if their income dropped.
A host of lenders, including Halifax, Santander and Barclays, have tweaked their stress tests in recent months.
Santander said it could allow home buyers to borrow up to £35,000 more.
But relaxing stress testing rules, while making it easier for buyers to get a mortgage, could see house prices rise as demand increases.
The Sun's James Flanders explains how to find the best deal on your mortgage
What is happening with mortgage rates?
Mortgage rates have been falling steadily across the UK following a number of Bank of England (BoE) base rate cuts.
Trump's "Liberation Day" blitz of tariffs also led to a number of lenders slashing interest rates below 4%.
The base rate is the rate the BoE charges to high street banks and lenders when they borrow money.
If it goes up, it means mortgage rates tend to rise too, as well as savings rates. When it falls, it sees the opposite happen.
The base rate currently sits at 4.25%, having been lowered from 4.5% earlier this month, and down from 5.25% in summer last year.
According to Moneyfactscompare.co.uk, the average two-year fixed-rate mortgage is 5.12% today, compared to 5.93% a year ago.
The average five-year fixed residential mortgage rate today is 5.09%. This is down from 5.50% a year ago.
More base rate cuts are expected this year.
It's worth bearing in mind, when your mortgage rate falls is dependent on the type you have.
Those on tracker and standard variable rate (SVR) mortgages tend to see their rates fall first.
However, if you're on a fixed rate, you won't feel the impact of any rate changes until your deal ends.
If you are coming to the end of a fixed deal, most lenders let you lock in a new rate up to six months beforehand, which can be worth doing.
If rates fall after you agree a new deal, some lenders will let you sign a new one at a lower rate.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio (LTV) has changed, you'll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home's value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you're nearing the end of a fixed deal soon it's worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first.
To find the best deal use a mortgage comparison tool to see what's available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You'll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements.