As the markets react to surging US inflation what does it mean for interest rates back home? How are lenders reacting to the news and what changes have happened this week that may make it easier for some self-employed to secure a mortgage?
Insight into US Inflation and Its Potential UK Impact
With a powering economy, a low unemployment rate and stocks reaching record levels, prices are back on the up in the US. US price growth was reported up to 3.5% in March from 3.2% in February over the last 12 months.
As a result, it’s looking increasingly likely the Fed will wait longer before cutting interest rates, which will be a blow to Joe Biden in an election year. In more bad news the persistency of US inflation means that expectations of multiple cuts this year are now less likely.
So what does this mean for us? Firstly it’s important to note there is a stark difference between the US and UK economy with the former powering to heights whilst the UK continues limping between positive and negative GDP.
Traditionally, the Bank of England tends to follow the Fed, not acting on rates until it sees what’s happening over the pond. As such the expectations of a rate cut in the UK by the early summer have been somewhat dampened, with swaps rates creeping back up.
The next 7 days in the UK are going to be nail-bitingly stressful at least until Wednesday 17th April when the UK’s latest inflation figures are released. Expectations for a fall in the UK remain but if this isn’t the case then it’s likely that the Bank of England will hold the base rate at current levels for much longer than most people would want.
A Closer Look: Mortgage Accessibility for Self-Employed Individuals
It’s April and we’re in the new tax year so the focus from many lenders is shifting towards the self-employed as they start to sort out their end-of-year tax submissions.
Pepper Money, along with Twenty7Tec, Knowledge Bank and Mortgage Broker Tools shared their latest study into 2023.
- They revealed that 2023 saw an increase in searches including self-employment with the highest ever volumes of self-employed mortgage searches, with 5.83% more than in 2022 (1,199,507 vs 11,334,13).
- However, the growth in the prior two years means that total self-employed mortgage searches increased by 41.21% in 2023 compared to 2020.
Their findings revealed 80% of self-employed people say their employment status makes it more difficult for them to get a mortgage. However, there are options available, and self-employed borrowers can find the right mortgage for their circumstances with the study finding that 69% of self-employed borrowers can find a mortgage for the loan amount they want.
Rate Watch: Key Updates on UK Mortgage Interest Rates
Despite the bad news from over the pond and as markets deal with a new uncertainty from rising US inflation, there was some good news for UK borrowers with HSBC and TSB Bank announcing rate reductions across a variety of their mortgage products, and changes to enhance affordability.
Suffolk Building Society introduced some competitive rates for Holiday Lets, catering to the growing demand in this sector. With products available on a 2-year discount, 2-year fixed and 5-year fixed.
Perenna Increases Maximum Lending and Enhances Foreign National Lending Policy
Perenna has broadened its lending criteria, now accommodating loans of up to £2 million with competitive Loan-to-values (LTVs):
- 85% LTV available for loans up to £2m (subject to underwriting review)
- 90% LTV available for loans up to £1m
- 95% LTV available for loans up to £750k
As well as increasing their maximum loan size Perenna also made some enhancements to their Foreign Nationals Policy, some highlights include:
- Minimum length of time in the UK is now 18 months
- Where no indefinite rights to remain, the applicants must be on a tier 1 or 2 visa
- Minimum individual income of £50K per year for the applicant(s) on the skilled visa (other applicants can be included on the mortgage who are not on a tier 1 or 2 visa but are a dependent to the scheme with the same end date)
- There must be a minimum of 12 months to remain on the visa at the point of application
- EU nationals can continue to be accepted with pre-settled or settled status providing they have been resident in the UK for a minimum period of 18 months
- No LTV restrictions are in place other than the standard limits
These updates significantly increase the accessibility of mortgage products to a broader range of borrowers.
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