The Fox Davidson Mortgage Update

Quarter 1


Welcome to the Fox Davidson quarterly housing and mortgage report. The aim of the housing and mortgage report is to focus on the previous 3 months housing and mortgage news and data and to provide an insight into the markets we work in and know. We have gathered and interpreted data from various external sources as well as our own internal records of transactions for the previous quarter.

Fox Davidson.


Residential Rates remain low with lenders continuing to offer their lowest ever fixed rates. There have been some interesting 10 year fixed rates launched by the likes of Nationwide TSB and Woolwich. We believe that low interest rates are here to stay for several years and with base rate trackers now being offered by the main banks below 2% and with no early repayment charges, is fixing for 5 or 10 years really the best way forward!?  We believe if a client has room in their budget for unforeseen rate variations they can benefit from the low tracker rates.  The risk is minimised on these if we select a product with no early repayment charges as if rates are threatening to rise, the client can select a fixed rate at that point.

Income multiples continue to frustrate the market. In the Mortgage Market Review which came into effect in April 2014 the new guidance from the Financial Conduct Authority was that mortgages would be based on an affordability basis, i.e. Gross income, minus deductions, minus credit commitments and living costs results in an amount a lender would be prepared to lend you. BUT, lenders including Santander, Halifax, NatWest and Woolwich all limit lending by a maximum income multiple as well, and it keeps changing! Woolwich had limited lending to a maximum of 4.5 x gross income but now will lend up to 5 X income for loans above £300,000.

This can be incredibly confusing for anyone looking to get a mortgage.  Going direct to a lender could be a big waste of time given they have lengthy delays of over 2 weeks in getting appointments direct at a branch.  There is then a good chance the client doesn’t meet their lending criteria, or even if they do, they may not lend enough and the client may not know that in theory other banks may lend more.

Buy to let is getting progressively more competitive thanks to new entrants to the market including Foundation Home Loans, State Bank of India and Fleet mortgages. With strong rental yields (particularly outside of London), rising property values and tightened criteria for clients trying to buy their own home, rental property is going from strength to strength. There is some regulation from Europe that will come into effect next year and this will be covered in more detail nearer the time, but for now, the market is healthy and lenders are lending.

First Time Buyers. In the pre-election budget the LibCon’s announced details of a Help to Buy ISA; A tax free savings account that will allow First Time Buyers to save money and get a Government cash bonus of 25% per month up to £50. You can read the full details of the Help to BUY ISA here.


Lack of Stock We can certainly speak for Bristol & London as they are the 2 areas most of our clients are buying property in. There is not enough Stock! A client went to a Bristol open day in the last week of March. There there were another 26 couples there that day and all buyers were asked to put in a closed bid. Our clients went in 10k over asking price but were outbid by another couple. It is crazy out there, we need more houses and flats.

Lloyds banking Group produces a Housing Report. In the January report they give a realistic target of 2 Million to 2.5 Million new homes that need to be built by 2025. Current principal house builders will only complete 150,000 per annum leaving a shortfall of around 1 Million homes over the 10 year period.

One way house building will increase is through use of brownfield sites. We looked at this in more details in a recent blog, read more on that here.

The Nationwide’s Q1 report reports that house price growth slowed in all areas except for the North England with London dropping form 17.8% to 12.7% growth. of the UK’s biggest towns and Cities, St Albans was the UK’s biggest climber at 22% annual house price Growth. Manchester was the lowest with a 1% year on year decline.

UK Economy

Europe has been the talking point of the last quarter and issues within the Eurozone and with Greece in particular have caused the value of the Euro to decline.  Quantative easing was introduced by the European Central Bank in early March in order to ward off deflation and stimulate the economy.  Whilst the UK is not part of the Euro, anything which happens in Europe has a direct effect on us.   We have therefore seen slightly decreasing interest rates and the prospect of rates remaining low for the next few years.

The build up to the general election has been gaining speed over the last month and this has caused some instability within the housing market.  Various policies aimed at First Time Buyers or landlords have had effects on how people look ahead to their property purchases this year.  We have received calls from First Time Buyers excited about the Conservative/Lib Dem proposed Help to Buy ISA and we have received worried comment from Buy To Let landlords about the Labour proposed 3 year minimum tenancy length for tenants.  The outcome of the election will be decided in May however we do not see it having any immediate major effect on the economy as wider forces are in play.


It’s a tough market for buyers and being prepared with a mortgage agreement in principle in place can make all the difference.

According to the property website Zoopla the average sale price of property in Bristol is £260,115 (2015). Detached houses in Bristol average £396,000, semi-detached property in Bristol averages £256,000, terraced property £219,000 and flats £193,000. There is an increase in sale prices of 3% across all Bristol property types in the last year.

The highest street values in BS postcodes include Beach Lane in Bitton, Whiteshill in Hambrook, College Fields in Clifton, The Ridgeway in Westbury-On-Trym and Toghill Lane in Doynton. Prices here are north of £1.4m.

We have been looking at hotspots as we track all our purchase transactions on a map of Bristol.  We have noted the following:

  • Brislington shows a definite hotspot for first time and next time buyers. We feel this may be due to good schools in the area and property prices still being relatively good value. From discussions with clients, many may have preferred to buy in Bedminster area however they have been pushed out to BS4 because of property prices and space. New facilities in Brislington are opening up such as bars, cafes and independent shops.
  • East Bristol is popular with first time buyers. Areas sweeping through from St George, through Easton, St Pauls and into Montpelier. These are areas of Bristol which are undergoing regeneration and a good level of development. Prices are still good for first time buyers.
  • Bedminster is a hotspot for a mix of purchasers. First time buyer, next time buyers and buy to let purchasers. We feel this area is popular as rental returns are good for investors and people who previously rented in the area then look to buy in the same area. Schools are also good so many clients wish to remain and upsize as their families grow.

Client profile

Looking over the last quarter Fox Davidson has arranged finance on a balanced mix of business.

  • 53% purchase
  • 47% remortgage

We have a good balance at present consisting of a steady stream of people active in the property market and also good numbers of clients coming off their current rate and looking around for a better deal. This indicates that the market is relatively healthy.  At times of instability both the purchase and the remortgage market can suffer, the purchase market quite clearly declines as wages are squeezed, people find it difficult to amass deposits and lending criteria is tightened.  The remortgage market can also be a good indicator of current conditions as this often suffers when criteria is over tightened, rates are instable and we are in a period of deflation.  This is not the case so we surmise that the market is looking healthy for 2015.

Looking at the purchase market in particular:

  • 58% residential purchase
  • 42% BTL purchase

Residential purchases are interesting as 50% of the purchase business we arranged in the last quarter was for First Time Buyers.  This is great news and shows that people are still able to get onto the property ladder.  We noticed that the majority of first time buyers have deposits which are gifted by family members.

Of the Buy to Let mortgages we arranged, 58% were for portfolio landlords.   This indicates that portfolio landlords are very active in the property market at present, they are remortgaging current portfolios in order to raise capital to purchase additional stock.  This is driving the market forward in both property prices and also rent reviews.

Q2 Looking Forward….

Pension Rules changed in April allowing clients to cash in pensions. We should have some useful data in our Q2 report regards pension cash being used for deposit on property.

The next party to govern the UK will be decided in the general election in May.  We feel the outcome of this will not have any massive impact on rates in the near future.  Interest rates are low because we are in a recovering economy, we do not have an issue with inflation and as Europe is in the middle of a vast quantative easing programme we envisage rates will remain low, no matter who is in power.