Economic Optimism and Retrofit Mortgages: A Promising Week for Borrowers & the Climate?

Sweet dreams for borrowers or nightmare on Threadneedle Street?

The first full week after the General Election has been a positive one: positive for the UK economy, which grew by a better-than-expected 0.4% in May, for the Pound, which hit a one-year high, for the FTSE 100, which ended the week in the green, and for the property market — despite hawkish comments from Bank of England Chief Economist, Huw Pill.?

In a speech to the Asia House think tank on Wednesday, Pill welcomed the news that the headline inflation rate returned to the 2% target in May but said: “It is not enough to meet the target in a transitory or fleeting way.?Rather the MPC must achieve the inflation target on a lasting and sustainable basis.”

He then added: “The difficulty in extracting signals about changes in the low frequency persistent component of inflation from noisy higher frequency indicators has not disappeared. Nor is it likely to in the coming months.”

The audience had no idea what that meant, other than the fact that Huw probably isn’t a hellraiser on a night out. Traders did, however, and the financial markets, which had been betting 60-40 in favour of a rate cut, immediately reacted and reduced the odds to 50/50.

But there’s still hope for that first cut to the base rate since early 2020. Wage growth, the main culprit for services inflation, is expected to cool further next week.

Mortgage rate cuts continue apace

Cooler wage growth may be why lenders are viewing things differently to markets.

Over the course of this week, mortgage rates have continued to tumble, with major players such as Nationwide, Halifax and Barclays making further reductions to fixed rates.

But perhaps the clearest sign that lenders are expecting a cut in Bank Rate came from Virgin and Clydesdale Bank, who announced a 0.25% reduction to their Standard Variable Rates on Thursday.

It’s rare for lenders to tinker with their SVRs unless there is an official adjustment to the base rate, so this move may suggest they feel one is coming.

Even surveyors upbeat

You know it’s been a positive week for the property market when even surveyors are more upbeat. After all, your average surveyor makes Huw Pill look like Happy Mondays frontman, Shaun Ryder.

In its latest residential property market report, the Royal Institution of Chartered Surveyors (RICS) said that, over the next three months, a net balance of +20 of survey respondents anticipate a recovery in residential sales, up from +10 in June.

According to Tarrant Parsons, RICS Senior Economist: “There are some factors emerging now that could support a recovery in the months ahead. If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates.”

That’s a truism, but even if the Bank of England doesn’t lower the base rate next month, an analysis by Newspage of its data found that mortgage approvals have risen by 4.4% on average in the three months after the previous eight General Elections compared to the three months before. So demand for property, if history is a guide, should rise between now and September. And that, in turn, should support house prices.

Positive news across the pond?

Looking forwards, next week we get the all-important UK inflation data, which will be a key driver of the Monetary Policy Committee’s decision on August 1st.

Current consensus estimates see headline inflation remaining sticky at 2%, with core inflation stuck at 3.5%. While this indicates that a rate cut hangs in the balance, it also sets low expectations, as a CPI print below estimates could reignite hopes of a reduction in a few weeks’ time.

But even if we have a nightmare on Threadneedle Street in August, with the Monetary Policy Committee once again erring on the side of caution, it may be that borrowers and the UK property market have been saved by prices at the pumps 3.5 thousand miles away.

In June, US inflation cooled to 3% from 3.3% in May, largely due to lower petrol prices. This, markets reckon, may just have paved the way for the US Federal Reserve to cut interest rates as early as September.?

And history shows that where the US leads on rate policy, the UK tends to follow.

Lender Movements

We've seen several changes this week from lenders across both residential mortgages and buy-to-let products. Key changes have come from:

• Hinckley & Rugby Building Society - Rate reductions across their product range
• Pepper Money UK - Rate reductions across a selection of products
• Virgin Money - Some small reductions to a selection of fixed-rate products
• Nationwide Building Society - Reduction of up to 0.30% on selected products
• Leeds Building Society - Selected 2 & 5 year fixed rates reduced by up to 0.24%
• Gen H - Reduced the rates on homebuying bundle range by up to 0.4% & later in the week reductions across all homebuying and standard 5-year rates up to and including 80% LTV by 15 bps.
• Coventry Building Society - Reductions across their 65% to 85% LTV product range
• Accord Mortgages Limited - Reductions across selected new business products
• Barclays - Small reductions across purchase and remortgage products
• MPowered Mortgages - Reduction to on products up to 80% LTV with 2 year rates
• Halifax - Small redutions on their Homebuyer & First Time Buyer range of upto 0.13%

In the buy-to-let space:

• Paragon Banking Group PLC - Reductions across their buy to let switch range
• Foundation Home Loans - Reductions across their buy-to-let range
• The Mortgage Works - Further reductions on limited company 5-year rates
• Coventry Building Society - Reductions across selected products but increases to 75% LTV fixed rates
• Saffron Building Society - Reductions on Ex-Pat BTL products

Lender Spotlight - Virgin Money - Retrofit Mortgages

At The Mortgage Stop, we like to keep you informed about the latest and most innovative mortgage products available in the market. This week we're shining the spotlight on Virgin Money who have this week launched their new "Retrofit Mortgage" where you may be able to get up to ￡15,000 cashback for energy efficient home improvements

Retrofit Boost Mortgages

Key Features

• Money in their bank: Up to ￡15,000 cash to spend on energy efficient home improvements right after the mortgage completes.
• No increase to mortgage balance: Cashback can help avoid additional borrowing, which could save on interest over the term.
• Installation offers also available: Virgin Money have teamed up with Hive, who can supply and fit the right kit, with packages matched to the cashback amounts. This might make life easier for you, but there’s no obligation to use Hive. You can choose whichever suppliers you like.

The Benefits of Retrofit Mortgages

Virgin Money's Retrofit Boost mortgages are not only beneficial for homeowners looking to reduce their energy bills and environmental footprint but also add value to their properties. Energy efficient homes are increasingly attractive to buyers, and these improvements can significantly enhance a property's marketability and value.

Considerations

• Virgin charge a higher rate of interest on the Retrofit Boost Mortgage in return for providing cashback. The cashback must be spent on eligible improvements to the property being mortgaged.
• You must check renovations are suitable and have any necessary consents. This includes planning permission, building regulations approval and landlord consent.
• Virgin may contact you to check the improvements and energy savings made.

Finally, while the innovation of new products is always welcome, before deciding on a Retrofit Mortgage of this type you should shop around and compare the cost of other ways of upgrading your home efficiency against the cost of the retrofit mortgage.

Until Next Week

In summary, it's been a week of optimism for the UK economy and property market. The post-election landscape has seen continued growth and positivity, with major lenders like Nationwide, Halifax, and Barclays reducing mortgage rates, and Virgin Money launching its innovative Retrofit Mortgage. These developments offer promising opportunities for first-time buyers and those looking to remortgage. Keep an eye on the market as we move closer to the Bank of England's next decision in August. Until next week, let's hope for more good news and opportunities for borrowers.

Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage. Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority