I used to write this column weekly, which was both easier and harder.
Easier, because it was more about products and rate changes that had gone on in the previous week; but harder, because sometimes not much happened, week to week. Oh, for those days….
The past month has been another tumultuous passing of days, and sometimes it really seems to be a case of one step forward, two steps back.
In the first couple of weeks there was some optimism that the latest Bank of England (BoE) base rate movement could mark the peak of the current rate rise cycle. Many were urging the Bank to enter a period of calm as inflation was surely about to start its long journey back down to more acceptable levels.
The pesky underlying rate of inflation did not read the script
After the shambolic politics of Truss, the markets had calmed and we were starting to see people return to the market as they anchored themselves to the new norm of mortgage rates, react against ever-increasing rental costs and look to buy in a softer market.
With rumours abounding that the government might well return to demand-side assistance with a new type of Help to Buy scheme or similar, prices were arguably set to begin a recovery in the latter half of the year, and certainly before a general election.
In fact, Rightmove reported that asking prices had reached a record high, up 1.5% on this time last year, as some semblance of market confidence that there would be neither a recession nor a house price crash returned.
We even saw the comeback of the 100% mortgage, courtesy of Skipton Building Society. While I have had some concerns in the past around these products, the time seemed right for a new type of 100% mortgage, one that was underwritten prudently and where affordability was carefully considered. Granted it will not help everyone, but it will help some and shows a confidence in the property market that is much needed.
The pre-election housing battle has started, mostly over the greenbelt and housing targets. I hope there will be a drive for some new thinking
With tenant demand surging to an all-time high as reported by Paragon Bank, rental costs are rising and anything that can help tenants move onto the property ladder should be welcomed.
That, of course, was before the latest inflation figures caused swap rates and therefore mortgage rates to start to increase again. Although the headlines showed that inflation had finally fallen below double figures once more, it was not quite as much as expected, and the pesky underlying rate of inflation did not read the script. In fact, it went on strike and refused to budge.
For some reason the inflationary pressures are more acute and stubborn in the UK than they are elsewhere in Europe. Wonder why that could be? Same reason we have a tight employment market, lorry queues at Dover, higher food prices and…. Oh well, at least I have my blue passport. It’s all going rather swimmingly, Boris, isn’t it? How are you, anyway? Oh….
Everything is up! Three-month Sonia is up at 4.13%, while swap rates have soared
All this shows just how difficult it is to call the market, especially now, and those who were waiting, on the expectation that rates would shortly fall, are going to be disappointed.
So, mortgage mayhem continues, reflecting the fact that the BoE came to the party too late, yet again. Although this is nowhere near as bad as the mini-Budget debacle, it is nonetheless a perfect storm where frenzied inflation headlines mix with a panicking BoE, which will no doubt go too far to try to make a failing policy work, causing more issues when we need a period of calm.
Lenders therefore pulled rates as swap rates increased and, while we understand the pressures, I hope they can approach this situation more carefully and with more warning than they did late last year when they did not have a choice but to react quickly. According to Moneyfacts, since that period 373 mortgages have been removed, with this figure representing almost 7% of the market.
Two great guys doing great things for their companies and for the sector. This industry is wonderful
The mortgage market needs some cool heads, who think about the customer first and foremost.
Everything is therefore up! Three-month Sonia is up at 4.13%, while swap rates have soared. Since the previous column:
2-year money is up 0.49% at 4.96%
3-year money is up 0.48% at 4.73%
5-year money is up 0.44% at 4.40%
10-year money is up 0.37% at 4.04%
Meanwhile, the government and its opposition have started the pre-election housing battle, mostly over the greenbelt, housing targets and who has the power to decide where and what to build.
The time seemed right for a new type of 100% mortgage; underwritten prudently and where affordability was carefully considered
To be honest, I am quite looking forward to seeing this battle develop and I hope there will be a drive for some new thinking. So far, more ideas seem to be coming from the opposition, but there is a long way to go yet and it’s easier to say rather than to cost and do.
We have also seen the introduction of the long-awaited Renters (Reform) Bill to parliament. This could abolish Section 21 eviction notices, give landlords more powers to evict ‘anti-social’ tenants, and set up a new property portal and ombudsman.
There have also been a few interesting changes from lenders. Aside from Skipton’s 100% product, well done to Nationwide, which has one of the first proper ‘green’ initiatives with its additional borrowing 0% mortgage products. They’re available up to £15,000 and to 90% loan-to-value on a two- or five-year fixed for green home improvements.
The mortgage market needs some cool heads, who think about the customer first and foremost
Halifax has made positive changes on interest-only lending, with the maximum LTV available on sale of mortgaged property increased from 50% to 75%. For part-and-part the minimum equity will be calculated at the end of the term, not at point of application.
Halifax is also increasing the qualifying LTV from 75% to 90% for an enhanced maximum loan amount when selecting a five-year-plus fixed rate. For like-for-like remortgage customers with no additional borrowing, who receive employed income only, up to 75% LTV at 5.5 times loan to income (LTI) may apply.
For employed incomes only of £50,000–£75,000 and LTVs of 75%–85%, the standard LTI is being increased from 4.75 times to 5 times.
Accord has made a welcome move where a client’s property is downvalued and its LTV changes, meaning they’re no longer eligible for their selected product. The client will now be able to choose a new product either from the original product range at application or from the latest product range — whichever is better for them.
Sometimes it really seems to be a case of one step forward, two steps back
Accord is also enhancing its interest-only policy with the sale of property maximum LTV moving from 50% to 60% and part-and-part available to 85% LTV.
Meanwhile, Tandem has increased its maximum LTV for self-employed borrowers to 90%.
Finally, the Mortgage Strategy Awards took place recently and it was another excellent event.
Of all the recipients of awards, I must say that both Mortgage Personality, Richard Rowntree of Paragon, and Outstanding Contribution, Martin Reynolds of SimplyBiz, were very worthy winners.
Two great guys doing great things for their companies and for the sector, and both of whom have interesting backgrounds. This industry is wonderful.
Skipton for its 100% mortgage — it shows some innovative thinking
Nationwide’s new 0% Green Further Advance offering
Halifax for its affordability and interest-only changes
The reduction in mortgage products and therefore in consumer choice
Report by Aviva suggesting that almost 70% of Brits are struggling with debt as interest rates could rise further
The Bank of England MPC — could some of this have been avoided?
For those who missed it, the Mortgage Industry Mental Health Charter (MIMHC) released its latest survey recently, looking at the overall mental health of our industry.
The good news is there are some improvements, with 41% saying they would consider their mental health satisfactory, up from 36% last year. There are still 16% who consider their mental wellbeing of concern, and though this is an improvement on 21% last time it is still too many.
There has been moderate progress but 30% still said their firm had no mental health support or wellbeing strategy in place.
For us all to progress, this needs to change. We work a stressful job, often long hours and, as last week showed again, subjected to sudden periods where rates are pulled with little notice.
It is easy for firms to put something in place, whether training their own mental health first aiders or simply contacting MIMHC and looking at resources on its website.
We need to look after our people, more so now than ever.
This article featured in the June 2023 edition of MS.
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