I expect many of you, like me, are currently enjoying the price crash at the petrol pumps. If you drive a gas-guzzler, also like me, the difference is a staggering £40 per tank.
I am so looking forward to seeing the signs at petrol stations saying 0.99p a litre; I cannot remember when I last saw that. But I do remember, when I had my first car about 25 years ago, filling it up for just 47p a litre.
The price crash has got to be great for consumers, businesses, the wider economy and the mortgage market, right? Of course, the answer depends on your perspective.
The collapse of oil prices has led to a monumental slide in the rouble, which some commentators are suggesting will implode the Russian economy. And, as with any significant shift in the global economy, there are likely to be ripples that have far-reaching consequences that are not initially visible.
Think of it like a train crash in ultra-slow motion. Oil prices fall, which leads to a drop in the rouble; banks with Russian exposures are hit; UK banks with Russian exposures retreat; liquidity tightens; the cost of funds goes up; and so on. Russia is not the only country feeling the impacts of super-low oil prices – this problem is global.
So, what can you and I do about it?
Obviously we cannot do much about the underlying problem but we can think about what we could do for mortgage borrowers.
Since 2008, the remortgage market has been just 20 per cent of gross advances compared with 50 per cent in the early part of the decade, so it has never really recovered since the crash. Buy-to-let remortgages, on the other hand, make up a much bigger percentage – looking at our business, it is more like 50-60 per cent.
There are lots of residential borrowers on very low tracker rates who probably do not worry too much about their mortgage because the payments are so low. Also, because we have had a couple of false dawns on when interest rates are likely to go up, many people probably think rates are going to stay this low for a long time yet.
This may be a good time for borrowers to have a good look at their finances to ensure they will be best placed if the markets get the jitters and rates start going up.
Fixed rates look like a great bet right now. At the time of writing, two-year swaps are just 80bps and five-year just 1.22 per cent, so fixed-rate products are great value and there are lots of them.
I could easily foresee a situation where ultra-low petrol prices may make us smile at the pumps but hit swap rates hard, forcing up the cost of fixed-rate products.
Another reason why borrowers should visit their mortgage broker is the general election. Markets always get nervy in the three months before a general election and we should all be worried if the balance of power sits with Ukip, or the SNP for that matter.
I cannot see any good coming from another hung parliament but it is looking like a distinct possibility. I would not be surprised if this adds 20-30bps to the cost of fixed rates in the spring.
Well done to Imla, which has produced a manifesto for the Government on how to address some of the problems we face in the housing market. It is about time a government deals with the underlying problems rather than using it for political gain.
Of course, we cannot underestimate the effect of regulation both past and future. The impacts of the MMR and the further interventions by the Financial Policy Committee have not fully materialised yet but they will become clear in the first half of this year.
Lenders are now preparing for the European Mortgage Credit Directive, which, although it is not going to be implemented until April 2016, is such a big project that it will take at least a year to prepare for.
While 2014 will go down as a good year for the mortgage market and probably a great year for mortgage brokers, I believe 2015 will be a flat year for gross advances with a slow first six months followed by a pick-up in activity after the election.
Brokers should expect to see their market share increase as the banks continue to retreat from branch-based lending. I would not be surprised if intermediaries took 60 per cent plus in 2015.