Taking Stock: Rate rise will lead to remortgage gold

Nigel Stockton, financial services director at Countrywide, casts a critical eye over the industry 

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It has become quite clear over the past two months that as an industry we will have to fight for ourselves and battle through the barricades if we are to achieve a significant increase in business this year.

Figures from the Council of Mortgage Lenders and the Bank of England show a sluggish housing market in the first quarter of the year. For example, CML data for February revealed all aspects of the property purchase market were over 10 per cent down year-on-year, although annual lending recovered in March. This when Help to Buy mortgage guarantees were going gangbusters and we were all thinking this would boost activity.

Without going round and round with where we are, it is clear most brokers are currently 10 to 15 per cent up compared with this time last year – which means direct lending cannot be having a very good time. 

Overall, broker life continues as normal and there is not much in the way of significant news. Product availability is good, rates are at an all-time low and there is no sight of the Bank of England increasing the base rate, so remortgaging is difficult. Consumers are not really mobilised to look around for deals unless it really is a steal.

We have seen increased competition between lenders in terms of rates but a slight relaxing in criteria. HSBC’s recent announcement that it is releasing a 1.99 per cent five-year fixed mortgage certainly got markets and consumers excited. 

Meanwhile, I have high hopes for Pepper and its range but I would not say there is any sign of significant innovation.

Anyone who expects 100 per cent loan-to-value lending to be back in place by the end of this year is incorrect and I am able to say that with certainty. There will be no lifeline. Indeed, to cut a long story short, we have absolutely no chance whatsoever of getting higher than a 95 per cent LTV mortgage. The PRA, the FCA and almost all the new Basel capital rules make it impossible. I am totally confused at how any experienced broker could ever think it possible with the increased oversight of two regulators.

On that regulatory note, I cannot see how any increase over RPI is justified in our FCA fees. To be clear, I am more than happy paying costs and RPI, and also recognise the cost of regulation must be met. I also understand that complexity and oversight compared with processes before the credit crunch mean fees will be higher than they were back then. The FCA has a difficult job covering the Consumer Credit Act work as well.

On the other hand, it is reprehensible that, for the fifth year running, we are looking at increases in fees of over 5 per cent. Think of it another way, we have no alternative provider and no choice but to pay the monopoly supplier of regulated services. If any one of our suppliers of services had come to us with this kind of systemic increase we would have sought an alternative long before now. Communication is the key here: explain to us why fees are so much higher and we probably would not feel so aggrieved. 

Elsewhere, the mortgage credit directive rules were disappointing. If I were a lender I would hold fire on transitional arrangements until after the MCD comes into force. It means that mortgage prisoners could remain just that.

Meanwhile, LTV is the main driver of remortgage opportunities and will give us all a lifeline. It will be proved true that we will only strike remortgage gold once rate rises begin and consumers are more proactive in reviewing their arrangements and move lenders. However, consumers will only be able to move to a different lender and a different deal if their LTV comes down.  

Finally, I would like to wish Colin Franklin a very happy retirement. He was an excellent chief executive officer at Coventry Building Society. Although he was a soul boy and a Leicester fan, an oxymoron if ever there was one for aficionados of the M69 derby match, we wish him a long and happy retirement.