The British Bankers' Association has announced that mortgage approval processes have now settled after the introduction of the Mortgage Market Review (MMR).
It said monthly mortgage approvals had returned to a typical level of about 40,000 mortgages for house purchases, some 12% more than at the same time a year ago.
Lending figures declined during the early months of 2014 as lenders prepared for and introduced the new rules in April, ordered by City watchdog, the Financial Conduct Authority. Guidelines were designed to ensure households only borrow what they can afford to repay, but made banks and building societies very cautious about lending money.
Read more about getting a mortgage after you turn 50.
Competition has led to better deals
Aaron Strutt at Trinity Financial said: “The mortgage market has now started to settle down and the lenders are getting more used to the new compliance regime.
“There is more good news for anyone looking for a new deal as there seems to be more competition to attract new customers. At the moment the lenders are doing this in the form of cheap fixed and tracker rates.”
Many of those over 50 are looking to downsize to save on running costs and will need a new mortgage. Those with existing home loans should also ensure they can get a good deal on a remortgage.
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Prepare for interest rate increases
With speculation on when the Bank of England will increase rates it is important to prepare. When interest rates finally do start to push upwards – which could be as early as next year according to latest predictions from economists – monthly repayments for those on currently on variable rate deals, either a tracker mortgage or those paying the lenders’ standard variable rate (SVR) will see payments automatically increase.
These borrowers might be more inclined to look at fixed rate loans in advance of the Bank of England hiking interest rates.
As lenders anticipated a base rate rise, deals have been getting more expensive, but over the past few weeks dropped again as competition hots up.
Chelsea Building Society is offering a two-year fix at 1.69% with a £1,675 fee or a five-year from Woolwich at 2.99%.
The number of tracker mortgages on the market has fallen by a third since the MMR came into force in April, and is now at the lowest level since December 2009. In April, the total number of tracker deals stood at 482, but this fell to 330 by early August.
However, those left on the market have also been getting more competitive. Tesco Bank is offering a two-year tracker at just 1.5% with a £995 fee.
How would an interest rate increase affect the over-50s?
If you don’t need a new loan until next year – it’s not too early to start looking. Most lenders’ offers are valid for between three and six months, which means anyone whose current deal ends even as far ahead as February next year could be well placed start making inquiries and line up a better value deal than might be available closer to the time.
A word of warning
The news doesn’t mean it is a piece of cake to get a loan these days. Lenders require a far more detailed breakdown of an applicant’s spending habits and the mortgage interview will last as long as three hours.
Whether you use a lender or a broker, the examination of what you spend will include household and grocery bills, clothing, transport, nights out, holidays, as well as debts. Even care home fees for family will be included.
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In July, Bank of England governor Mark Carney set out his plans to reduce household indebtedness: firstly, by limiting the amount mortgage customers can borrow to 4.5 times their salary; secondly, by forcing them to undergo a "stress test" to ensure that, even if interest rates rise 3%, they will still be able to pay.
Strutt added: “The additional affordability questions have caused problems and borrowers still need to be careful and avoid missing debt repayments wherever possible to keep a clean bill of financial health.”
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