Hello, once more, and a belated Happy New Year to my lovely bunch of Market Watcharians.
Once more into the breach we go, fresh from our winter sojourns and over-indulgences, thrusting with purpose into the bright new year that lies ahead, shimmering with mysteries, unforeseen dangers and a treasure trove of opportunities to discover. It’s like our very own series of Traitors.
As we step into February, the mortgage world, much like the unpredictable weather, continues to surprise us. After the switchback hell ride of 2023, with its tumultuous rate changes and stress-inducing shake-ups, 2024 has kicked off with a curious mix of optimism and caution.
Around half of landlords are looking to increase their portfolio this year, which shows they believe that the current property market is a buying opportunity
Actually, let’s be honest: January was pretty crazy for brokers, with leads flowing strongly once more as a multitude of prospective borrowers finally cast their attention back to the housing market.
Consumer confidence, while not at an all-time high, is thawing. The hesitance of late 2023 is giving way to a more measured optimism as people acclimatise to the new normal. Advisers and brokers, the ever-vigilant sentinels of the mortgage world, continue to play a pivotal role in navigating these choppy waters.
As for predictions, well, I’ve learned that in this industry the only certainty is uncertainty. However, I can say with confidence that adaptability and innovation will be the key themes of 2024. Whether it’s lenders tweaking their criteria or brokers finding novel ways to serve their clients, the ability to pivot will be paramount.
There are so many seemingly conflicting forces at play in the market, with the last inflation report showing just how sticky inflation can be, and serving as a stark reminder that nothing can be taken for granted — albeit the small rise should be viewed as a metaphorical speed bump rather than a fundamental change of direction.
Perenna’s long-term fix suite could help to bring these products into the mainstream at last
With wage inflation starting to cool and despite the threat of other global issues, there is expectation that the next set of data will show a return to falling inflation.
We have also seen grim economic news, with the high street still struggling and a report from The Insolvency Service showing that, in 2023, the number of company insolvencies was the highest since 1993. There is a prevailing view among many, echoed by the free-market thinktank the Institute of Economic Affairs, that interest rates should be cut immediately, warning of the dangers of deflation, stagnation or recession if the economy isn’t boosted. I very much favour this.
The Bank of England (BoE) has an unflattering record of being behind the curve and a cut of 0.25 percentage points now would be a great help. The fear of losing control of inflation on the reverse is just as unnerving as it is of rising too high.
All eyes are on the BoE, which still seems set on an unshakeable course to keep rates higher for longer, however loudly the public scream. Although it is ‘independent’, it will be interesting to see if any political pressure is lightly applied with an election in the wings.
The housing market requires long-term, cross-party solutions, a housing minister in situ for the duration and more than half-baked schemes to secure re-election
Speaking of politics, at least we know that finally some politicians are starting to see for themselves the issues everyday folk have been facing, with George Freeman, MP for Mid-Norfolk, resigning from his position as science minister and citing an inability to cope with skyrocketing mortgage payments. He was earning at least £118,000 and his mortgage was rising from £800 to £2,000 per month.
I don’t know where to start with this, or end for that matter, but this is a microcosm of the issues people are facing across the country and will feature strongly on the doorsteps come election time.
But have no fear, all, as the government has a new idea to solve everything: the magical 99% mortgage.
I urge lenders to try to not change rates so quickly. We need a semblance of calm
With a smaller percentage of younger voters likely to vote Conservative in the next election, you can see why the government is finally keen to address one of the key issues younger voters are concerned with: housing. While it is about time this issue is front and centre, and it will be a key battleground for all parties, the latest proposal comes with more questions than answers.
In theory, 99% mortgages could help some people get onto the housing ladder, but there are more questions around affordability calculations, interest-rate costs and capital adequacy rules for lenders. Will these be subsidised by the taxpayer like the Help to Buy scheme, to entice lenders to offer them?
There is also the fear that such schemes act to increase house-price inflation as the stock of property generally is not increased, or put more borrowers at risk of negative equity should prices fall in the future.
There are so many seemingly conflicting forces at play in the market
The housing market needs urgent attention, but it requires long-term, cross-party solutions, a housing minister in situ for the duration and more than platitudes or half-baked schemes to secure re-election.
A look at the money markets shows that three-month Sonia has indulged in dry January and stuck firm at 5.22%, while swaps, despite a recent small tickle upwards, are more relaxed than they were at the end of last year.
Since the previous column:
2-year money is down 0.48% at 4.22%
3-year money is down 0.50% at 3.93%
5-year money is down 0.47% at 3.67%
10-year money is down 0.31% at 3.63%
Again we have had the seesaw effect of mortgage rates being cut, pulled, increased and cut again over the past few weeks. It’s pointless to talk specifics here but I urge lenders to try to not change rates so quickly. We need a semblance of calm and can’t afford a repeat of the angst of last year, for consumer, broker and lender sakes.
I’ve learned that in this industry the only certainty is uncertainty
There have been interesting tweaks to criteria and some product innovation, with Perenna’s long-term fix suite hitting the market, which could help to bring these products into the mainstream at last. And I would like to see more of Virgin Money’s latest five-year product, with an option to switch after two years.
HSBC has tweaked its lending-into-retirement policy so borrowers more than 10 years from retirement can obtain a loan to age 80. It no longer requires confirmation of pension provision for these customers. And it will allow part-and-part lending to 85% LTV.
Halifax has changed its non-UK national policy, reducing the minimum income requirement to £75,000 or £100,000 joint. MPowered Mortgages will now go to 90% LTV for foreign nationals with two years in the UK.
In buy-to-let (BTL), a raft of lenders including BM Solutions, Paragon, Santander and TMW have cut rates and/or reduced their stress tests, leading to the question: is the BTL market poised for a renaissance?
Consumer confidence, while not at an all-time high, is thawing. The hesitance of late 2023 is giving way to a more measured optimism
A report from The Mortgage Lender says that around half of landlords are looking to increase their portfolio this year, which shows they believe that the current property market is a buying opportunity.
Finally, February may be the shortest month but, in our world, it’s long on developments. As we bundle up against the last of winter’s chill, let’s prepare for spring — a season that symbolises growth, renewal and perhaps more surprises from this ever-dynamic industry.
Let us embrace the melody of the market — a song of resilience, innovation and the unyielding power of broker endeavour.
What Really Grinds My Gears?
Last year I mentioned the algorithms on social media that seek to divide us. In a recent Newspage news agency discussion, we talked about the fact that we should try harder to not let these attitudes get into our industry, and not let people deliberately antagonise and undermine us, because that’s what it does.
One person said to me last year that he was sorry but he had to try to “take me down” to get noticed. Originally, I said, “Yeah, no worries, I get it,” but on reflection I fundamentally disagree with this attitude, and not just for my sake.
In this industry we champion new blood and new voices, and we will support and help you
I have never agreed that to get a leg-up you must tear someone down. I have always found the opposite to be true.
None of us are on a pedestal that needs to be challenged and taken down, especially before you get to know someone. We are all human, doing our job as best we can.
In this industry we champion new blood and new voices, and we will support and help you. It’s everything the excellent AMI/Imla initiative of Working in Mortgages is trying to do.
Hero to Zero
The Mortgage Industry Mental Health Charter reaching its 100-signature milestone. All businesses should check this out and get involved — it’s easy to do so, and we must look after each other
MPowered Mortgages’ whizzy AI marketing tool, Marketing Assist, which you should all investigate. Some free marketing help, especially tech related, is a real help for many brokers with small budgets
Nationwide’s and TMW’s service for brokers to indicate vulnerable clients who need more support. There is still a lack of options for some clients
According to Cifas research, one in six UK adults has exaggerated their earnings to get a mortgage, or knows someone who has done so. Stay vigilant, people
Some of the blatantly inaccurate, false or completely misleading advice provided on social channels
The resurgence of Trump in the US and the continuing fragility of global conflicts. We are all human and my prayers are for the peace seekers on all sides of every conflict
Andrew Montlake is a director at Coreco
This article featured in the February 2024 edition of MS.
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