FEBRUARY 2024

After over three decades of providing mortgage advice to the Island, it has become apparent to our team at The Mortgage Shop that the first month in a new year tends to indicate how busy the property market is likely to be for the rest of the year.

A GOOD START TO THE YEAR

2024 has started positively with most of our clients having the income and deposit to be able to go ahead with a purchase, in circumstances where their borrowing will satisfy the exacting underwriting processes now imposed by all mortgage providers.

This level of activity is surprising when one takes into account the much higher interest rates that are now being charged by lenders, although it shows that after nearly eighteen months of inactivity, buyers have now accepted that financial sacrifices must be made if they wish to become property owners.

LOWER ASKING PRICES

Asking prices have been falling since their peak eighteen months ago, and at the beginning of February, there were 1378 apartments and houses on offer to satisfy the needs of First Time Buyers through to home movers looking for property well in excess of £1 million.

A WIDE CHOICE FOR FIRST TIME BUYERS

First Time Buyers, the group who stimulate the overall food chain of the market are well catered for with no less than 287 apartments and a few houses available in the price range from £300,000 to £500,000, whilst there are a further 274 apartments and houses in the range from £500,000 to £700,000.

BASE RATE HELD

At the beginning of February, the Bank of England decided to hold Base Rate at 5.25%. This is the fifth consecutive month of the rate being held at this level which suggests that the Bank is satisfied that rising inflation has now been reduced sufficiently to no longer warrant any further increases.

Financial markets and consumers are hoping that interest rates may have peaked, at least for now, and this is reflected in a large reduction in the cost of fixed rate borrowing in the UK during the last four months of last year.

This has been brought about by significant competition between the main mortgage providers who had found their loan books dwindling.

The Jersey counterparts of UK lenders price their funding differently, which has resulted in the cost of borrowing in Jersey being noticeably higher, which means that shopping around all lenders is even more important.

The good news is that at the time of writing two leading banks have reduced their rates quite noticeably which could result in competitors following suit.

SIGNIFICANT SAVINGS BY SHOPPING AROUND

By way of example, the cost of servicing a typical mortgage of £400,000 over a 30-year term will cost an extra £251 a month or £3,012 pa with just a difference of 1% on the rate. Over a five-year fixed period, the total saving will amount to £15,060.

It is for this reason that existing borrowers, upon reaching the end of their fixed rate should check what the rest of the market has to offer rather than falling into the trap of continuing with their current provider.

Our advisers at The Mortgage Shop are frequently asked to review existing mortgages for many borrowers who have fixed rates coming to an end, and whilst a move may not always be a good idea, it is worth doing in any number of cases.

AN UNPLEASANT SHOCK FOR EXISTING BORROWERS

The review is now even more important this year, as many borrowers will find that their five-year fixed rates of 2.5% or less, will increase to between 5.25% and 6% which will be a huge shock to the household budget.

It is inevitable that this will result in property having to be sold in certain cases where mortgages become unaffordable, although every option should be considered before taking this decision.

Where possible, it might be worth extending the term of the mortgage to age 70 so reducing the monthly cost, selling expensive cars and replacing with cheaper runabouts, cutting back on holidays and eating out – the list is endless.

A move to another provider is likely to cost approx. £5,000 as the mortgage will have to be applied for all over again with the associated legal fees, valuation costs etc., although no stamp duty is paid except on any increase in the original borrowing.

Taking a payment holiday is not recommended, as the missed payments will be added on to the capital balance outstanding and could also result in one’s credit score being adversely affected.

BEST RATES

There has been a reduction in best rates this month and it is possible that these could reduce further in the next few weeks.

Bank of England Base Rate 5.25%
2-year Tracker rate 60% LTV	February 2024 5.95%	January 2024 6.04%	January 2023 4.44%
2-year Fixed rate 60% LTV	February 2024 5.74%	January 2024 5.79%	January 2023 5.79%
2-year Fixed rate 90% LTV	February 2024 6.04%	January 2024 6.22%	January 2023 5.49%
5-year Fixed rate 60% LTV	February 2024 5.14%	January 2024 5.39%	January 2023 5.29%
5-year Fixed rate 90% LTV	February 2024 5.34%	January 2024 5.81%	January 2023 5.49%

Rates correct at 05/02/2024