POST-PANDEMIC PERKS FOR THE PEOPLE

Think low rates are on the way out? Think again. Ahead of the latest base rate rise, Virgin Money announced a 10 year fixed 1.89% loan, almost immediately undercut by Halifax (1.68%) and Lloyds (1.66%). Even as base rates and the absolute lowest rates creep up, rates for more typical borrowers, are coming down. A year ago for example, a couple earning £60,000 between them and looking for a 90% mortgage on a £300,000 property would have had to lock-in for two years at around 3.5%, if they could find a lender at all. Today, they would have a good choice of products and should pay 1.9% at most. The picture is similarly more benign for the self-employed and for landlords (see below). This broad shift shows greater lender confidence in underlying values, in their own resilience, in the consequences of the pandemic, and in their ability to interpret earnings made, during it.

BTL PRODUCTS FOR LIMITED COMPANY & PORTFOLIO MARKET

Any property being sold* must have an energy performance certificate and rating, from A (the most efficient and least costly) to G. The difference in running costs, grabs attention: fuel bills for a B rated property will be roughly half those of its D rated equivalent. An A rated house can cost half as much again – often even less†. At a time when ‘working from home’ often means ‘heating on all day’, this matters. Yet, last year, only 4% of existing (i.e. not new) properties were rated A or B, compared with 85% of new homes. Super-eco, A-rated properties – almost all from smaller, niche builders – saw unprecedented demand. Mainstream housebuilders are taking notice.

"COULD HAVE SOLD THEM SIX TIMES OVER"

‘The Bec’, an A-rated Newbourne Homes development of nine apartments in London SW16, is a brilliant example. It uses air source heat pumps, underfloor heating and mechanical ventilation to maintain even interior temperatures and supply constant fresh air, via carbon filters which remove pollen and pollutants (VOCs). It also controls moisture levels to prevent condensation and captures up to 95% of waste heat. Each parking space has a charging point, every home has two bike stores and the communal lighting, is solar powered. To cope with heavy rainfall, paths are permeable and rain water drains into an underground tank. Energy costs are likely to be 90% less than for period properties of a similar size. Buyers love them. All apartments sold within a few days of the off-plan launch since when, says Anna Truman of our New Homes team, “We could have sold them all again, at least six times over”.

WHO ELSE IS BUILDING TO THIS STANDARD?

In Exeter, Heritage Homes has been committed to the A rate standard for many years. Their 82 home development ‘The Green’, is soldout thanks to both universal A-ratings and an impressive mix of contemporary designs. Their new development, Rosebanks, a few miles to the north of Exeter, takes the concept further. All-electric (The Green has gas boilers) with air source heat pumps, underfloor heating and solar panels, buyers can have additional solar panels and a Tesla ‘Powerwall’ storage unit.

Above:

Above: Wilmslow £1,300,000 guide (Alderley Edge)

Right: Westcott, Surrey £625,000 guide (Dorking)

Below: Rosebanks, Devon from £499,950 guide (Exeter)

Normally highly conservative, this market continues to defy its stereotype, with many loans of under 3% on offer and lots of innovative, limited-edition products. These include one fixed for two years at, incredibly, 0.99%, again emphasising the relaxed attitude of the money markets about future interest rates. BTL rates have come down because this sector has proved reliable – and thus profitable and attractive – for lenders. If landlords are enjoying lower rates now it is because, collectively, they have earned it.

Remortgagors Fixing Six Months Ahead

Despite the observations made above, increasing base rates are pushing borrowers approaching the end of a fixed rate term to get their enquiries in early. This is worth doing: having got approval, most lenders will lock in your new rate, six months before the loan is granted. So if you need to re-fix in less than a year, it's worth putting out the initial feelers, now.

† www.privatefinance.co.uk

For independent advice, contact Private Finance on 0870 600 1650 or jackson-stops@privatefinance.co.uk.