There have been some significant changes in the UK mortgage market since I penned my original product assessment of the Castle Trust Partnership Mortgage last September.
The big news in the last nine months is how the Funding for Lending Scheme (FLS) has, thanks mainly to the efforts of the building society sector, driven down mortgage interest rates, even for those with smaller deposits.
While this is a positive outcome, albeit at the expense of retail savings rates, the housing market still needs a healthy dose of innovation to help those who require something other than a vanilla mortgage product.
It was refreshing to see Barclays helping address the issue of raising a deposit for first time buyers earlier this year via its ‘Family Springboard’ mortgage where family members deposit 10% of the property price in a linked savings account, leaving the homebuyer to come up with a more manageable 5% stake.
The Chancellor also delivered some new initiatives of his own as well as endorsing the use of shared equity lending products in his March budget when he unveiled the Help to buy programme.
This will open some much needed new avenues to existing homeowners and first time buyers as well as giving the construction industry a much needed shot in the arm to boot.
There is an equity loan Help to Buy scheme available now where consumers can purchase a new build home with a 5% deposit whilst borrowing a further 20% interest free from the government.
From April 2014 the Help to Buy guarantee scheme comes into play whereby homebuyers put down between 5% and 20% by way of deposit while the government provides the lender with a guarantee for up to 15% of the loan.
The details of this scheme are still to be finalised, and it will be interesting to see how the pricing stacks up when the time comes.
The Castle Trust Partnership Mortgage continues to help people buy their own home (not newbuild) and with stubborn inflationary pressures and meagre pay increases the order of the day, it remains a viable option for those looking to keep monthly repayments down in order to fund other essentials.
People wanting to help pay for their children’s university education for example, or relocate to a home with extra living space for a growing family have the opportunity to do so without putting excess pressure on the family budget.
I reiterate my original warning that prospective Partnership Mortgage borrowers need to fully appreciate the potential impact of future price fluctuations on the equity in their home before signing up and that the product may not be suitable if you live in an area where house prices are volatile.
On the topic of house prices, London has again been the area where house prices have outstripped the rest of the country over the last 12 months.
If you take the latest figures from the Land Registry for example, property prices in the capital are up 9.6% in the last 12 months, whereas in other major cities including Birmingham, Leeds, Manchester and Sheffield prices have remained flat or even fallen slightly.
The lower cost of borrowing courtesy of the FLS has undoubtedly helped to keep the mortgage market ticking over during 2013, but more innovative solutions from lenders are needed to help borrowers overcome the problem of high property prices and relatively low income multiples.