Market Watch: 2023: A haze of bewilderment

I don’t really know how to sum up this year.

Most of it I have spent in an effervescent haze of bewilderment, suffused with misty memories of better days that, like some primordial phantom of romance, come to curl, and rest, under a cascade of neon pollen just out of reach.

If last year, as I wrote then, was an ‘annus horribilis’, then this has been a hell of a year, with the emphasis on the ‘hell’ bit.

This time last year, I wrote: “If 2023 is waiting in the wings with its own ‘Hold my beer’ moment, I implore it to be remembered as the year when things got better and everyone got a little bit nicer!”

It’s about sustaining a future with enough brokers still there

Well, that plea aged well! In fear of tempting fate, I am not saying anything about 2024 just yet. I am putting my trust in the universe.

To me, and judging from conversations with some other brokers, this has been the hardest year since 2009; a year when it felt like we, as brokers, were working treble the amount of time for half the income, rebroking product transfers multiple times in a manner that clearly must have been loss leading in terms of time spent and income earned.

“But it takes only a few minutes,” some say. Those who say that are clearly doing it wrong, then, or just not understanding the process, or saying it for clicks and likes.

It is galling to hear from a procession of lenders that they “can’t do anything about it, margins are tight”, and then see the massive profits posted, the clearly expensive marketing deals and sponsorship deals on TV, with sport, podcasts and such like.

We all need to recharge, take time and recall what is important

Spending some of that budget supporting brokers when they most need it, a channel from where many get 80%-plus of their mortgage business, should be a no-brainer. It’s not just about saying, “Will we get more retention business for it?” It’s about sustaining a future where there are enough brokers still there to deal with the market when it rises and when lenders need brokers to turn the taps on again.

Be careful what you wish for

For those lenders following a tech B2C approach, I would say be careful what you wish for. In a tech world, all branding and customer loyalty could too easily become irrelevant as buyers look at one thing: price. Banks will become just a product provider, battling it out on price alone as margins get even more diluted.

Don’t get me wrong, I love our lender partners. I know we need you; I know that all of you on the intermediary side work so hard, and have many of the same worries and issues, and we will always support you. This year, in fact the past few years, have taken a toll on us all.

It fascinates me that younger generations — Gen Z in particular — regard protection as more important than older groups do

As for the broker, despite the sweat, effort, endeavour, stress, anxiety and frustration, I see so many of us never once straying from our mission to help educate and advise our clients. Whatever it takes. It’s what we do. What we have always done, and always will do.

If you think this all sounds a little downbeat, it’s not meant to be. It’s about how we are more resilient when we stand together.

There is too much sh*t going on in the world that aims to divide us; the algorithms on social media that work in a certain way to amplify our biases, conscious or unconscious, because they know anger and controversy work. It’s why some people know that the more they say something ‘out there’ very left or very right wing, the more ‘popular’ they get. They don’t give a toss about the toll it could be taking on people’s mental health.

Next year could be the opportunity to buy before prices slowly rally

I guess this is not very ‘Market Watch-y’ so far! So, back to politics. We have had the Autumn Statement. Cue housing tumbleweed, a good ‘Jeremy’ gag, a few tax cuts that won’t make much difference, and a massive claim that our prime minister was responsible for getting inflation below 5%. Er, it’s the only one you really don’t have much control over!

There is the extension of the Mortgage Guarantee Scheme, which helps a modicum. Even the Treasury confirms that it has accounted for just 1.5% of completions since its 2021 launch.

The change to permitted development rules — to allow anyone to change their property into two flats as long as the outside remains unaffected — catches the eye, but we should not have expected much on housing this early.

Despite the sweat, effort, endeavour, stress, anxiety and frustration, I see so many of us never once straying from our mission to help educate and advise our clients

The time for that is when the starting gun for the election is getting loaded, so maybe the Spring Statement will bring more opportunity. The Leasehold and Freehold Reform Bill is very interesting, however.

We have a new housing minister, who is actually an old housing minister. Welcome back, Lee Rowley, the 16th housing minister in 13 years.

We also have a new foreign secretary, who is actually the old prime minister who started all this mess back in 2016! Who writes this stuff?

The Office for Budget Responsibility says house prices could fall almost 5% next year and won’t recover to their 2022 peak until 2027. This is not a massive amount and will of course upset the doomsters, but it does show that next year could be the opportunity to buy before prices slowly rally. People waiting for those falls could easily time this wrong and miss the nadir, especially if a pre-election boost does come.

In a tech world, all branding and customer loyalty could too easily become irrelevant as buyers look at one thing: price

It is very good to see the fall in inflation and the subsequent fall in swap rates and product pricing. The best rates all the way up to 90% LTV now start with a 4 and hopefully there is still some way to go. Well done to Nationwide and Halifax for currently leading the way.

So, to the things that everyone ‘follows’ these days — the money markets. Three-month Sonia has risen an ickle bit to 5.22%, and swaps have continued to ooze downwards. Since the previous column:

2-year money is down 0.19% at 4.70%

3-year money is down 0.25% at 4.43%

5-year money is down 0.30% at 4.14%

10-year money is down 0.36% at 3.94%

In the mortgage market, despite the onset of winter, there are already some green shoots of spring. According to First Direct, the value of first-time-buyer mortgage applications jumped by 9% annually in October, the first increase recorded over the course of 2023. The Bank of England has found that mortgage approvals bounced back in October, and Zoopla reports the number of homes available for sale are at a six-year high.

With the long-awaited launch of Perenna, we finally have a product that will properly test the market on the attractiveness of long-term fixes. With tie-ins only in the first five years and, crucially, access to higher affordability calculations up to six times joint income, will this be the game changer for long-term fixes?

To me, and judging from conversations with some other brokers, this has been the hardest year since 2009

NatWest has rolled out its new portal, aiming to make it easier to submit and track new business applications, and we have continued to see a plethora of ever-welcome rate cuts, tweaks and changes.

On the protection side, we have Ami’s Protection Viewpoint 2023 — ‘The Perception Gap’. What fascinates me is the fact that younger generations — Gen Z in particular — regard protection as more important than older groups do, especially income protection. We also see younger generations more trusting than older people of insurer claims statistics. This is positive and perhaps is because insurance-related misselling, such as PPI, has either never been on their radar or is now a distant memory.

This is a real opportunity to make those protection conversations more memorable. We do, however, need much more help from insurance companies in terms of changes in product development, marketing and pricing. Surely, in a Consumer Duty world, certain pricing models should be consigned to the history pile.

I am not saying anything about 2024 just yet. I am putting my trust in the universe

On that bombshell, I wish you all the very best over the coming holiday season. We all need to recharge, take time and recall what is important. Give yourselves a hug and remember that you are not alone.

I always say that we are all juggling several balls at once. Some of these are made of glass — health, family, friends — and they are the ones you don’t drop. The others are mostly rubber, like work. It always bounces.

To those who were there for me this year, thank you. This industry is special. Keep the faith.

Andrew Montlake is a director at Coreco

This article featured in the December 2023/January 2024 edition of MS.

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