Looking ahead to what 2024 might bring, seems like a fool’s errand at the best of times, but I’m certainly much more positive about what the next 12 months will bring in the mortgage market now, than I was in the spring and summer of this year.
There appears to have been a noticeable shift in recent weeks, aided of course by falling inflation, an MPC much more willing to sit in neutral when it comes to bank base rates, falling swaps and a recognition by lenders that their product rates needed to shift if they wanted to secure the business that is available.
That gives me a much more positive outlook for the year ahead, but of course it’s not all wine and roses.
Just recently the governor of the Bank of England, Andrew Bailey, said that economic growth was “lower than it has been in much of my working life” and said that interest rates will not be cut in the “foreseeable future”.
Now this is hardly the most positive of assessments, and it certainly suggests that if there is a tie in the voting for cutting bank base rate at an MPC meeting in the near future, we know which side of the line Bailey is going to come down on.
However, when it comes to mortgage product rates, for example, and what moves them, we’re all acutely aware that bank base rat doesn’t play the definitive role for lenders by any stretch of the imagination.
If it did, then would we have seen any number of lenders cutting rates over the past few weeks, vaulting over themselves to bring product pricing lower, particularly for those higher LTV/equity products?
We certainly wouldn’t, and it is to swap rates and to the deposit reserves of banks and building societies, plus of course market competition and business volume requirements, where we must look in order to set out a course for the initial stages of 2024 at least.
And here we find much cause to be positive because, as advisers will know already, rates have continued to drop as lenders seek to square the circle on everything mentioned above.
The point about money deposited in savings reserves seems particularly pertinent, and the need to lend out that money, which I’m led to believe has grown significantly as savings rates have improved.
Another further point is the opportunities that lower rates opens up for borrowers, who have obviously been impacted, whether it’s in terms of remortgage options, or indeed those who might have been put off by affordability constraints, when ideally they would like to purchase.
As rates dip, that affordability challenge lessens, and I’m of the opinion that, certainly in terms of purchasing, there could be a significant amount of pent-up demand to be unleashed in an interest rate environment which looks likely to be a percentage point lower than we have had to endure in 2023.
It was unfortunate not to see any specific activity-moving measures in the Autumn Statement but perhaps they are being saved up for March’s Budget. That would undoubtedly add some much-needed fuel to the purchase fire, but again we mustn’t wait for government support, but must make the most of the opportunities that exist.
Plus, of course, as in any year there are hundreds of thousands of existing borrowers coming off deals and looking for their next mortgage.
2024 has the potential to be a very positive year – just how positive will be down to what we can all make of the opportunities it presents.
Bob Hunt is chief executive of Paradigm Mortgage Services
