Welcome to another column in the wonderful world of the mortgage industry.
I feel like we are friends now, so I can confide in you. The truth is, it’s the small hours of the morning, I must be up early for a busy day, and I have just got home from an industry ‘do’. But I forgot the deadline for this column so am having to write it now.
I have tea, chocolate, a chakra candle and some smooth Leon Bridges grooves; and, tempting though it is to ask ChatGPT to write this for me, I shall refrain. Apologies for the content, and grovelling apologies to the editor, who I must say is looking particularly wonderful….
Advising clients now, in such a capricious environment, is tricky
The past few weeks have been dominated by two big things: a surprise general election and the never-ending saga of inflation and interest rates.
So yes, we are indeed heading to the polls on 4 July. This plot twist has everyone scratching their head, including the PM’s own Cabinet. I can only surmise that the government feels that the news now is as good as it is going to get, and waiting until later in the year — when perhaps we see an inflationary bounce and interest rates not yet falling quickly — is the worse option.
If the dour TV debate from the two main leaders gave us anything, it was that at least this campaign will be mercifully short. Rishi Sunak will have to wait and see if shouty and aggressive, and making up numbers, will filter through and change the dial, but the Conservatives are now facing an attack on two fronts, which history suggests never ends well.
As for Keir Starmer, being calmer and more empathetic may work to a degree, but he needs to sharpen his game for any future debate and get some of those new policies out into the open. The last thing anyone wants is a closer hung parliament and the prospect of Reform holding a balance of power.
The Bank of England is playing it cool — too cool for my liking — waiting for rock-solid evidence that inflation is finally under control
Housing was not really mentioned, but this will be a key area, with at least one policy of interest being put forward which, by the time you read this, may well be out in the ether.
The big question for all of us after the announcement was not, ‘Will Farage stand again?’ (eighth time lucky and it was so obvious he always would); or whether his milkshake does indeed bring all the voters to his yard; but whether we would see a sudden halt for buyers and sellers as people ‘wait and see’ what happens.
Evidence on the ground suggests that buyers have very much decided to get their skates on.
With the stability of a new government and hope of a fresh new housing policy without the merry-go-round of hundreds of housing ministers we have seen in recent years, plus the expectation that interest rates will ease slowly, buyer sentiment and activity are expected to increase, which will begin to push up prices once more.
Inflation news is like a mixed bag of sweets: some you love, some you don’t
With rental costs still surging, new buyers are keen to purchase and I still get a sense of pent-up demand just waiting for a green signal to break the levée.
Predicting a new government’s moves is like predicting British weather. But the other risk for buyers in waiting is that, with any change of government — particularly this time when there is no money around — a new prime minister will make the hard, unpopular decisions first, knowing they have a few years to turn things around again — they can always blame the previous lot! Playing the waiting game could mean higher costs later, like increased stamp duty or higher property prices if demand surges.
Inflation news is like a mixed bag of sweets: some you love, some you don’t. While the latest inflation figure showed the Consumer Prices Index increasing by 2.3% in the year to April 2024, down from 3.2% in March, this was a bit more than our economic wizards had forecast. It seems the UK is still clinging to its title of ‘Inflation Nation’.
I can only surmise that the government feels that the news now is as good as it is going to get
The Bank of England is playing it cool — too cool for my liking — waiting for rock-solid evidence that inflation is finally under control. Swap rates have inched up, hinting that the first interest rate cut might not arrive until the end of summer, with only one cut on the horizon this year. Translation: don’t expect mortgage rates to drop significantly any time soon.
Obviously, things can and probably will change, but advising clients now in such a capricious environment is tricky.
On market data, three-month Sonia has glanced glacially up to 5.23%, while swaps have waned slightly, like viewers’ interest amid the ‘Leaders debate’.
Since the previous column:
2-year money is down 0.11% at 4.60%
3-year money is down 0.14% at 4.34%
5-year money is down 0.18% at 4.02%
10-year money is down 0.19% at 3.84%
As far as house prices are concerned, the Nationwide House Price Index showed annual growth at 1.3% in May, up from 0.6% in April. Robert Gardner, Nationwide’s chief economist, noted the market’s resilience despite affordability pressures from rising long-term interest rates. Consumer confidence is up, thanks to solid wage gains and lower inflation.
Evidence on the ground suggests that buyers have very much decided to get their skates on
Interestingly, Nationwide mentioned that general elections don’t usually rock house prices much. Broader economic trends have a bigger impact than election jitters, so that’s another one in the eye for the social-media house-price doomsters predicting the end is still nigh.
In the broader mortgage world it is a mixed bag of rate rises and cuts, with little rhyme or reason. I implore lenders to be clearer on their rate change communication. Just saying rates are changing does not help us manage clients’ expectations. Under the Consumer Duty all communications should be clear, so please let us, and therefore our clients, know which rates are changing, to what and by when.
Generation Home has said it will provide brokers with its clients’ credit commitment details if any discrepancies are found during a soft credit check after a decision in principle has been submitted. This will help brokers manage clients and place cases better.
Co-Op has increased the maximum LTV for remortgage cases on a ‘£ for £ basis’, from 90% LTV up to 95% LTV, and has improved criteria for part interest-only and part capital repayment mortgages where a ‘sale of residential property’ is selected.
Santander is the latest to cut the product transfer window from six months to four, which will deliver better outcomes for clients, brokers and lenders pricing.
In the broader mortgage world it is a mixed bag of rate rises and cuts, with little rhyme or reason
In buy-to-let, The Mortgage Works (TMW) has launched its Portfolio Review tool to identify potential future borrowing opportunities on all properties landlords own. Having seen this in action, it is a helpful tool that will be welcomed. TMW will also no longer apply early repayment charges for overpayments in the last month of a product term.
Finally, Euro 2024 is about to start, where hopefully England can go one step further. A feel-good factor from that could help to stimulate the market as most seem more interested by this than by the election!
Good luck to the team and maybe we can finally bring it home, like our women did. Peace out.
Generation Home showing credit commitment details
TMW’s new Portfolio Review tool
47% of advisers strongly agreeing that 2024 is a positive year for protection sales growth, according to iPipeline — this is so important!
Lenders, insurance companies and fee-free conveyancers that still send pointless items in the post. Surely it is a basic green move to stop this. We don’t need or want it. It just gets binned immediately
Me – for forgetting to meet my editorial deadline
Nigel Farage – Tinpot Trump
You Know What Really Makes Me Smile?
I have been to a couple of events recently where I was not feeling my usual full-of-beans self.
I met a mixture of people: some I had known for years and felt so lucky to call friends, some I knew more generally, and others I was meeting for the first time. Without fail, you all lifted me up. Every. Single. Time.
That is the magic of this industry. The people; the knowledge that we are all facing similar issues, setbacks and successes.
This job is like a coconut shy. There are often more misses than hits but, oh, the hits are sweet, and they keep you coming back.
And, for the most part, it’s the look of people genuinely happy to help or celebrate the hits with you, whether business partners, competitors, lenders or others.
You all keep me passionate and striving for more. So, keep doing this for yourselves and for each other. You are never alone in this industry, and that’s what’s so special. Thank you.
This article featured in the June 2024 edition of Mortgage Strategy.
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