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Market Watch: A farce of ‘cunning plans’

Hunt and Johnson promise to negotiate a magic unicorn out of Brussels, the BoE MPC cuts its UK growth outlook, and the cost of funds falls

Given the coverage, you would be forgiven for thinking that Boris vs Hunt is the greatest showdown in political history. And what a battle it is – like choosing between Basil Fawlty and Blackadder. As for their ‘cunning plans’ to woo the voters and convince them that they can negotiate a magic unicorn out of Brussels, well, I despair.

Despite his best efforts, Boris is still somehow ahead, and the prospect of BoJo on one side of the House and Corbyn on the other surely represents a low for serious British politics, but no doubt an entertaining circus even the writers of The Thick of It never envisioned.

The most noticeable Boris plan where housing is concerned was the potential to axe Stamp Duty under £500,000 or change it dramatically; to cut taxes for middle incomes; and to give away a free money-tree to everyone who knows where Eton is.

As for Brexit itself? It. Will. Never. Happen. Unless, of course, it does. Whichever way, the market is once again threatening to be stifled by uncertainty after what has been, for many, a decent few months.

I can feel myself getting angry, so here’s moving on to the more humdrum dilly-dallyings of the latest meeting of the Bank of England Monetary Policy Committee. Of course, there was no change again, but more than this, they cut their outlook on UK growth due to Brexit uncertainty and general trade arguments. Trump, China, North Korea, Iran – what could possibly go wrong?

This means that it is now unlikely that we will see any increase in rates at all this year. As a result of all this, we have seen the cost of funds decrease accordingly, which means lenders could, if they wanted, cut rates even lower. However, cutting rates further is not what lenders want to do, as the rate war itself has come to a point where doing so is not in anyone’s real interest.

We need innovation, criteria and affordability changes and some fresh and exciting products rather than cheaper rates.

Clear quandary

It was also interesting to note that at least three BoE representatives have been at pains to say that, once there is some certainty back in the market, rates will have to rise quicker than many people think to stop the economy overheating.

The quandary is clear. Do you buy now on the basis that, after any semblance of certainty, both rates and prices will rise, or wait and see if rates and prices have to fall because we mucked everything up? I still say the former, but I am mostly an optimist.

We also had the BoE Money & Credit Report for May, which showed a stable market for mortgages. It was interesting in that the May mortgage approvals data does not quite tally with the kind of activity levels we saw on the ground. While June did see a slowdown in approvals for house purchases, April and May were very strong as people shrugged off Brexit concerns and made the decision to get on with their lives.

Meanwhile, remortgage activity has been more subdued in recent months, as many people have been proactively locking into new rates for some time now.

It is by no means firing on all cylinders, but the mortgage market is moving along at a respectable pace as the bottleneck that formed pre-March 29 starts to work its way through.

Lenders themselves are already deep into their ‘Summer Sizzler’ season, offering attractive rates to start to get more business in as the Summer holidays approach. As always, July and August could well be busier months than many expect and those that keep their focus will reap the rewards.

In the markets, three-month Libor has dropped a little at 0.77 per cent, while swap rates have also dropped.

2-year money is down 0.06% at 0.84%
3-year money is down 0.07% at 0.85%
5-year money is down 0.07% at 0.91%
10-year money is down 0.08% at 1.05%

Meanwhile, the topic of green mortgages has reared its shining head again, with the government announcing a £5m fund to help lenders develop green products. The idea of giving customers discounted rates if or when their home is energy efficient is not new, but I do quite like it. How the hell it works in practice is another thing and perhaps we can use this low rate environment for every lender to raise every product price by 0.2 per cent, only reducing it when the property is energy efficient. Just a thought…

The other discussion point is around mortgage prisoners, and well done to Ipswich Building Society for coming out with a product to try to assist. The range of like-for-like products uses affordability calculations at the product pay rate rather than a stressed one. It is a refreshing start at least.

In the BTL world, BM Solutions has made some decent changes which will help quite a few, as they reduce their stress rate down to 4.5 per cent for those borrowers taking a five-year fixed rate with at least £30,000 income and a good credit score. They also no longer require evidence to be kept on file for Proof of Gross Rent for background BTL properties.

NatWest has launched a lovely new simplified BTL calculator which is all very slick and friendly, whilst Vida has launched its Summer Headliner products, which is good to see from another nice lender.

It was also good to see that HSBC is also now allowing brokers to retain clients through its PT offering, even if it did not extend the loans in the first place. I have got to say that HSBC has been really trying to support brokers and we thank you.

Santander has also made a nice change for HNW clients with income in excess of £250,000. It will now do 75 per cent LTV on an interest-only basis with a top-up to 85 per cent on repayment. Nice.

Finally, Barclays has increased lending on new-build properties to 90 per cent LTV for houses and 85 per cent LTV for flats/maisonettes. Clients earning above £30,000 can access five times income multiples. Smooth.

(Really) finally, props to the cuddly Coventry for its new Contractor Policy. Nice to have more decent competition in this growing market.

Hero to Zero

Sycophantic maybe but Matt Lowndes – a legend, friend, geek and inspiration – wish you well, bro

Ipswich Building Society for its Like for Like range

Accord – I just like the lender, the team, its special circumstances ideas and its commitment to brokers

Property raffle gimmicks – steer clear

Companies that are ignoring mental health and stress. Man up yourselves and do something.

BoJo, Hunt, Corbyn: the whole sorry lot. Standard.

What really grinds my gears?

I recently did a podcast on stress and mental health. This is not a shameless plug: it is an important plea for companies in our industry to take this seriously and start looking out for it.

What I liked were some of the ideas implemented by Clare Jupp at Brightstar, such as a quiet place for people to have time out and having simple access to a stress councillor at any time.

We can no longer be an industry where ‘man up’, ‘don’t be such a girl’, or whatever such phrase is standard. We all suffer from stress at some point in our lives, we just don’t know when it is going to hit, or for what reason. I have OCD and have suffered from stress and anxiety and I am happy to wear my heart on my sleeve. It does not make us weak to admit it. In fact, it empowers us to succeed.

If you see anyone struggling, talk to them. If you feel you need help, don’t worry: you are not alone, and we can
all help.

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