Mortgage Market Update - August 2025

0:01Rob B:Hey everyone, it's Rob B here. You are listening to The Property Podcast. Rob D isn't here, but that is because we have another guest on who's going to bring us massively up to date on what is happening in the mortgage market. I learned a lot from this one. You will too.

0:22Rob B:Hey everyone, welcome to The Property Podcast. I'm super pleased this week that we've got Kelly on. kelly is from serious finance all her details are in the show notes if you're interested but what you should be interested in is this content because this week kelly gets into what is happening in the mortgage market right now which of course is super interesting but what i really loved was hearing about all these new products that are coming online all the innovation that's coming to the market but of course we don't just keep it all rainbows and unicorns we go into the stuff that's frustrating right now as well and we get into that and it's important to share both sides of the market like what is good but also what's frustrating so we cover all that Rob D will be back next week don't panic it is the summer so people are allowed holidays and he will be back next week with me but until then let's get the lovely Kelly on the show.

1:10Rob B:Kelly let's kick off with a quick overview of the mortgage market right now a lot has changed it feels like a lot has changed since we last caught up let's just take it a big picture at the moment how do you feel about the market at the moment, you personally? It's an interesting one because it's very positive, which is great. I would say we're going through a little bit of a transitional phase at the moment. The Bank of England have cut base rates, as we all know, just recently from 4.25 % to 4 % in August, which is the second reduction we've seen this year, which is really great. And the knock-on effect of that is that inflation is continuing to ease.

1:49And we're, at the time of this recording, is now around 2.4%, which is already good and strong. And whilst that easing is welcome news for landlords, the response from lenders, I would say, has still been quite cautious. Fixed rate mortgage pricing is still heavily influenced by the swap rates, which we spoke about last time, which have only moved slightly since the base rate cut, which is quite typical. For example, two-year swap rates fell by just a minimal amount of, I think it was about 0.8 % percent, whereas five-year swaps are remaining quite flat. When it comes to high street lenders, for example, like Barclays, HSBC, to name a few, they've made some modest reductions to the fixed rates.

2:33But others like Santander and NatWest are still holding back for the time being. But these lenders are like dominoes and are in competition with each other. So it's likely the knock-on effect will see further reductions very soon. And there's lots of optimism in the market right now more so than we've seen in a while and i'm confident this will drive the market on an upwards only trajectory let's hope anyway and what's the feeling in the market in your world

3:00Rob B:at the moment with another rate cut this year do you think it's possible obviously we're not going to hold you to anything and no one's going to get cross with if you get this wrong but i'd really be interested to get your view on do you think we will get one more cut because that'll be significant right absolutely i think going sub four percent psychologically i think that could be a really big cut even though it's the same amount each time if it's just another quarter of a percent but going down to 3.75 i don't know maybe just to me but i get the sense that that would make a big difference to everyone's mindset i completely agree and i'm pretty sure we're going to see one more again don't hold me to this and research does suggest with the economists of the UK, etc, are all predicting something similar.

3:44One more cut for the end of the year, which again, will just boost everyone's mindset, won't it? Just kind of kickstart everyone into putting the house on the market to getting the market moving again. And like you say, if that's then in a base rate, starting with a three, it just sounds so much more beneficial for landlords looking at opportunities and then swap rates will then obviously then follow as a result too. So yeah, let's keep everything cross and hope for that further reduction before the year is out.

4:12Rob B:So let's talk products at the moment. What's the best? The best can mean so much, right? But what's the best product out there at the moment or the most popular product, if that's easier? What are people going, okay, that's the one I want. And I appreciate this could change by next week. But right as we speak at the moment for investors, what's the best product that most investors are going for in a limited company? And what's the best or most popular product for investors who are investing in their own name? We talk about all the product ranges. If anything, I could put a recording of myself and keep playing it over and over again, because obviously there's lots of different products out there, lots of different advice, but it still is fixed rates.

4:51Fixed rates remaining the most popular choice, especially among your risk adverse borrowers who are seeking the budgeting certainty. We have lots of innovation coming through as well that we're seeing now. lenders, like I said before, are in competition with each other. So they're all trying to come out with something a little bit new. We're starting to see longer term fixes coming through the ranks. We've got lenders now who are also offering cashback incentives. So it's quite interesting. That could be anything from£200 to some lenders have even got£1 ,000 cashback being paid on completion, which can help with your legal fees.

5:28We've even also got the classic green mortgages, which are becoming ever so popular now. And this is for your energy efficient homes, where you've got an EPC rating of an A to C grade, which obviously for new builds, majority of the time, we are going to automatically have an A to C grading, which means you're always going to qualify for these green products. These green products can be anything from 0.1 to 0.2 % more competitive than your standard rates. so straight off the bat you're getting something a little bit more competitive your cash flow is improving and you're paying a lot less in the long run we are still talking about your tracker rate mortgages your variable rate mortgages with clients but what we tend to see for buy to lets is that landlords prefer to have that security you want to know exactly how much is coming out of your bank each month so you can forecast effectively the fluctuations is not something which is welcomed, although we're still talking about it.

6:26You never know, that might change as the base rate improves, as the market improves. But at this moment in time, your fixed rates are definitely most popular. And that is across both sides, both your investors in the limited companies and your investors are investing personally. But let's see if that changes.

6:42Rob B:You mentioned longer term fixes. So are you talking beyond five years? There's products out there now? There is for your personal name products. We are seeing a slightly longer term fixes. On your variable rate products, probably more so, we have more lenders now coming out with your lifetime trackers. Your lifetime trackers are typically tracking the whole lifetime of the loan. So if you have a 25-year mortgage, you are going to have a discount above the base rate and that discount is going to be fixed for that 25-year period. So depending on what happens with the base rate, you're always going to be 25 basis points above.

7:19I would like to see more longer term fixed rates being more popular with your limited company lenders. And more people are actually asking me about that now, which we've not really had before. So a few people actually this week have inquired about a 10 year fixed. We're not quite there yet with the limited company lenders, but I'm hoping that we're going to start seeing those become something new because that will be very innovative, something that we've never even seen before.

7:44Rob B:Yeah, that's only really been done in personal mortgages personal as in you buying your own home or remortgaging your own home is it'd be great to see that as a product and buy to let absolutely especially with the way interest rates are going at the moment if you hypothetically because it doesn't exist but if you could fix for 10 years around four percent i know it doesn't sound that exciting but if that product ever came out four percent historically as we know is a great rate i know we all got used to to super low rates, but actually that's an incredible rate over 10 years. So yeah, fingers crossed something like that happens.

8:19Rob B:Where else is happening in the market? Are we seeing higher loan-to-values being introduced? Are there other products that are coming out that are catching your eye? Maybe they're not that competitive yet, but they're taking the first steps in that direction. Yes. And 80 % loan-to-value ranges are starting to come back now, which is really positive again. They were temporarily withdrawn when the rates went through the roof a couple of years ago. So it's nice to see lenders back in that marketplace. One thing I would say about your 80 % product ranges, and again, we do talk about them from time to time, but my advice would be to approach these with caution.

8:55Firstly, the increased stress testing on these products sometimes means that the full 80 % isn't available depending on the investment. But more importantly, if you're planning to invest in multiple properties and eventually become a portfolio landlord, then your background portfolio is also stress tested by the lender, which they won't want geared any higher than 75 % loan to value. So this could affect your future lending capability. So please do bear that in mind when you're talking about anything above 75 % loan to value. We are also seeing lenders now introducing product ranges for your non-portfolio landlords and a different product range for your portfolio landlords.

9:36typically it was again across the board with majority of lenders it was a one size fits all whereas now we're seeing more competitive pricing for your non-portfolio landlords which again i think is a positive for the fact that there's lots of people who are starting off and making that first move and actually from a lender's point of view you're not as a risky borrower when you've only got up to three mortgaged buy to let properties which is what we would deem as a non-portfolio landlord. When you're then buying your fourth, you then go into portfolio territory, which again, there's still lots of very good competitive products out there.

10:14But it's nice just to see different product ranges, again, just giving people choice, which I like.

10:20Rob B:Yes, choice is good. And it's good that there's that coming into the market. So competition is always great, and that drives prices down, margins down on the lending. But the other thing it does is it creates new types of products which are interesting. and if you had a magic wand put you on the spot now kelly but if you had a magic wand and you could create your own product i mean not fit daft like no interest or whatever but like a sensible product that would benefit the market what would you do whether it's something that's been around before and no longer exists but you would bring back or create from scratch what would you do that's a really good question and you have really put me on the spot with that but I've seen historically a one-year fixed again not very common in the buy-to-let world and limited company world but a lot of people are wanting flexibility nowadays for whatever that reason may be and I think the one-year fixed is something which is going to give you that flexibility to be able to then re-look at the market again a bit shorter than having to wait your two years sometimes for some people two years is a long time let alone five years so I would quite like to see a one-year fixed and it would be really nice if we could start seeing more desktop valuations.

11:34We see a lot of desktop valuations on refinancing. We see a lot of desktop valuations on your run-of-the-mill buy-to-let purchases. But when it comes to new builds, desktop valuations aren't something which is readily available because obviously somebody wants to go out to the site and make sure that this house or this flat is standing. But actually, if it's got planning permission and if it's got building regulations sign off and we've seen all of that why do you need to go and see it so for me it would be a one-year fixed with a desktop valuation on a purchase for a new build and that would be my product of choice great i love it that would

12:09Rob B:have benefited me earlier this year i definitely would have taken advantage of that type of product so let's get back into the real stuff again and and the market and interacting with investors as you do at scale, what is their biggest frustration at the moment? It changes, right, from month to month, I'm sure. But right now, what seems to be the biggest bugbear with the investors you're dealing with? A lot of investors are trying to maximize their portfolios. So going back to an investor who's experienced, for example, and got a lot of cash tied up in portfolios, and they want to release that to be able to reinvest and go again.

12:43But the problem we're seeing is that because they're on such healthy rates from previously, some of the products are failing the affordability test. So we're not actually able to draw out as much equity as possible. We could have done perhaps two years ago. So that's a frustration, although we're managing to figure out different creative ways around that. And we're also looking at existing lenders a lot more and product transfers. So product transfers are something which we're writing a lot of at the moment, not so much in comparison to what we did previously, which again is a good thing because product transfers do provide you with a lot of flexibility.

13:22They're nice and quick and easy to do. And there's lots of lenders now who are really trying to offer customers competitive pricing. And actually, sometimes the pricing is even more competitive for their existing customers than it is for new customers. And we've got even more lenders nowadays who are looking at further advances. Still again, buy-to-let world in comparison to your main residential home, there's not as many lenders considering further advances, but there are more so now than there has ever been.

13:50Rob B:Kelly, could you quickly explain to everyone what a further advance is? Because I think it's great, but not everyone listening will know what that is. Of course. So when we're looking at a product switch with your existing lender, we can also apply to your existing lender to take a further advance out as well. So it's almost like an additional loan that runs alongside your main loan that you've already got on the property. The good thing with that is that we then compare what you can get with your existing lender with what's available on the rest of the market. Sometimes the rates that they've got for their existing customers are so much more cheaper that it would pay to stay than it would be if we would have to refinance you.

14:30Because if we're refinancing you, we may need legal costs. it's likely that we may need a new valuation you might have to pay a broker fee whereas with a product transfer and a further advance with your existing lender could be a lot more cheaper and a lot more easier because typically they may not even want to do a valuation they may use a desktop valuation or the original valuation that they had carried out sometimes with the further advances you might have a minimum loan size that minimum loan size could be 10 000 pounds so depending on how much equity you've got in the property, we may not meet that.

15:04But again, when you're speaking to a broker, they can look at the bigger picture. So they can then weigh that up against what we can get with the rest of the market for you. And depending on what it is, is your driver at that point, we can then make the best recommendation.

15:16Rob B:Let's talk about more frustrations and a huge frustration and a huge problem. Certainly the turn of the year was down valuations. It felt like a hundred percent hit rate at one point in fact it was every valuation i was seeing was getting down valued and with no consistency i might add as well you'd see from a few hundred pounds to thousands of pounds on the same properties which shows you sometimes what nonsense the whole thing is i get the sense now but you are closer to it that things are improving improving quite a bit and it's gone from happening all the time to occasionally happening now or am I being too optimistic you are seeing it you know you're obviously a lot closer to it than me so how are you seeing it right now no I completely agree the valuation optimism is definitely growing we're optimistic that property prices will rise slightly over the next 12 months as the market regains confidence and I'm keeping everything crossed as I'm saying that rental yields are at a decade high at the moment as well.

16:22And due to this, buy-to-let lending is forecast to grow by, I'm sure research is suggesting, 14 % this year, which is phenomenal.

16:31Rob B:Yeah, it's a lot. There is still caution being portrayed by valuers though, due to economic uncertainty. For example, the renter's reform bill, the up-and-coming autumn budget, to name a few. So, I do find that valuers try and scale back slightly. They also want to protect their liability when there's possible economic things happening within the market that could have a detriment to values. But overall, the sentiment is resilient and positive from my view. Now, with the rates cutting, the market being a bit more optimistic, are we seeing investors using equity within their own home? because if you can go and borrow around 4 % on your own home and then get a return of 6%, then you're doing quite well.

17:16Rob B:It's not something you should rush into. You should take advice from someone like Kelly. If you're listening to this, don't rush into this. But from your point of view, Kelly, I'd love to hear more investors go in that direction now because when the rate spiked, understandably, it wasn't their number one strategy for many investors because the rates were so high. but now with rates coming down and trending down, are you seeing more people going, okay, I'm going to tap into my equity to use that to go and invest in property? Yeah, and I've been asked this question more so frequently nowadays. And yeah, approach with caution, absolutely.

17:53Because when you're securing against your own home, your own home is at risk, of course. But your rates are actually a little bit cheaper when you're securing against your own home as well. So that's a nice tick in the box. Although one thing just to bear in mind is that it's all based on affordability from your own personal income when you're securing against your own home. Whereas if you're securing against an existing buy-to-let, for example, the buy-to-let lender's main affordability criteria is around the rental that the property generates. And although they require you to have some form of income and they will do an income check, that income check is quite secondary.

18:30So it is a bit more of a tick box exercise. Most of our lenders, for example, don't have a minimum income, but they want to see you have some form of income to cover your day-to-day living expenses as an example. So when securing on your main residential home it is more based on your income and you can only really secure typically four, four and a half times what you earn. So assuming that you can release the amount of equity that you're wanting to within those realms then that is definitely something which we can look at and it's something that we can run in parallel with a purchase as well. And there's lots of equity being sat in existing portfolios too.

19:05We're also seeing a lot of what we call consumer buy-to-lets. So we deal with a lot of people now that are based overseas. They used to live here in the UK and they used to have a family home here in the UK. They now are renting that out as they're overseas and they're gaining an income from that. And they've got a lot of equities out there. So they're looking to actually release equity from what used to be their former home. But if they haven't already bought a property here in the UK and they just got that one and we're refinancing that one, it is still deemed as a regulated mortgage because in the eyes of the PRA, which is who governs our mortgages, you are deemed as an accidental landlord.

19:44So affordability calculations are still coming into play with that. But we're seeing a lot of consumer buy-to-let refinance applications at the moment, pulling that equity out to then go and put that down for a deposit for a buy-to-let, whether that's personal names, limited company name, depending on your tax reasons. So it's a great strategy to be had and a good way to increase your investment opportunities.

20:07Rob B:Kelly, last one. I'm going to push you for more. And again, not an easy one to finish on, but what's the smartest move right now for investors to be making in this current market? So this piece of advice would change again, week to week, but right now where the market's at, what's the smartest move investors can be making? My suggestion would be to be prepared. like the scouts like the scouts absolutely be prepared if you're going into a purchase with blind vision then you are going to come up against hurdles at the end of the day you are investing in property and that does come with risks and many rewards be prepared with regards to your paperwork we are going to want to see as part of an application where your funds have come from and we are going to want to see the origination of those funds.

21:00If you feel that that's a complex journey, speak to a broker at the outset before you're even thinking about your investment and making sure that all of these questions are asked and answered. Make sure that you've got all of your bank statements ready to hand because it's likely most lenders are going to want to see your mortgage statements, your bank statements, your ID. If you're investing in a limited company and it's going to be a new limited company for you, that's absolutely fine. All lenders are happy to lend to brand new limited companies because ultimately you as the shareholder and the director are acting as the guarantor to the loan by way of signing a personal guarantee.

21:40So ultimately, we're going to be carrying out a small due diligence on you as the guarantor and we'll be lending to the brand new limited company. But be prepared, get that limited company set up now rather than later. Make sure you've got the correct SIC codes on the incorporation, which shows that your limited company is a property only company. Again, that opens up all of your doors to the whole of the limited company market. Get your limited company bank account set up. Sometimes there can be delays with business banks getting bank account set up. So let's get that done early. If you have all of that done and you then go ahead and put an offer in on a property, have a reservation accepted you are then ready to go if it's something that's off plan you may not need to be ready to go right here right now but if the exchange is imminent you're going to need to have all of that paperwork ready so just be prepared get all of the ducks in a row and then

22:34Rob B:you are destined for success love it love it kelly it's so true that i'll say in a different way property investing can be occasionally a pain in the bum it can but we're not it's not buying a borrow a chocolate from the news agent. It's buying a home that someone's going to live in and someone's going to give you a lot of money to purchase it with. Absolutely. But it's all for the long term, something that can change your life in an incredible way. So it shouldn't be easy because if it was easy, it would be too good to be true. But that's not what property is. Property is work and it is amazing, but it also is work and both are true and that's okay.

23:13I couldn't agree more.

23:14Rob B:Kelly thank you so much we really appreciate having you on it's been a great episode it's awesome thank you so much for having me a huge thank you to Kelly for coming on to the pod this week I've certainly learned a lot this week and I'm sure you have too next week we'll be back with another pod Rob D of course will be back joining me I can't wait for that but until then you wonderful people take care have fun bye