All the talk at the moment has been around Chancellor Philip Hammond, who last month stood up to deliver one of the trickiest, most anticipated Budgets for some time.
Like a chess game, Hammond had to play this one tactically, trying simultaneously to appease different sides, avoid attacks and ultimately protect himself.
We were given the usual pre-Budget leaks, the biggest area of focus being on the housing market. With a government seemingly determined to tackle the ongoing housing issues, as well as attempt to win back younger voters, policy around stamp duty for first-time buyers was the one to look out for.
For once the chancellor did not disappoint, axing the tax for FTBs on the first £300,000 for those buying up to £500,000. Paying £5,000 less if buying between £300,000 and £500,000 is a help, of course, but not massive for most people.
The Government has defined an FTB as such: “Someone who has never owned freehold or leasehold interest in a dwelling before and who is purchasing their only or main residence. Residential property anywhere in the world is counted when determining whether someone is a first-time buyer. Where there are joint purchasers, all purchasers would need to be first-time buyers.”
At least housing is at the top of the agenda
There are two main issues here. First, this change does not help those increasingly being put off moving due to spiralling costs; nor the all-important downsizers — the last-time movers who will free up valuable housing stock and help unblock the system.
Second, we have to guard against the potential for house prices simply to rise further to negate this gain.
So, while this is a welcome move by the chancellor, it does not alone deal with the more serious issues facing the housing market, including the lack of affordable homes available in the right areas.
Together with other aspects of policy promises that are light in detail, the jury remains unconvinced that this will lead to anything more than a feigned determination of the Government to build more and solve the crisis. After all, it is votes that count.
However, at least housing is at the top of the agenda. We need to keep this momentum going to affect any real change.
Elsewhere in the Budget, the downgrading of UK GDP growth forecasts made for some pretty grim reading, with expectations not even breaking the 2 per cent figure over the next five years. As Brexit still weighs heavily upon everything, the immediate health of the UK economy is far from certain.
In the markets, meanwhile, three-month Libor has increased to 0.52 per cent, while swap rates have chilled out in anticipation of the holiday season, up by only a smidge.
- 2-year money is up 0.04% at 0.64%
- 3-year money is up 0.03% at 0.84%
- 5-year money is up 0.03% at 1.09%
- 10-year money is up 0.03% at 1.37%
In the mortgage market more broadly, after the initial rush by lenders to increase rates we have seen some cutting once again, as swap rates ease. Competitive rates are still in abundance. Indeed, it makes me gasp when I see 90 per cent LTV products at rates below 2 per cent.
According to the latest UK Finance report, remortgaging together with stronger FTB numbers has propped up the lending market, and lenders have taken note of this.
A couple have taken advantage of the stamp duty move by launching 95 per cent LTV products. Barclays was quick off the mark with products at 3.64 per cent for a two-year fix and a £999 fee, 3.84 per cent with no fee, and a five-year fix at 4.54 per cent with a £499 fee available up to £500,000.
Newcastle also joined the 95 per cent LTV party, with rates from 4.25 per cent for a two-year fix and 4.6 per cent for a five-year fix, both with free legals.
Meanwhile, Scottish Widows, which has really come good rate-wise lately, continues to impress, with new five-year fixes with offset from 1.74 per cent with £749 fees to 50 per cent LTV, or 1.84 per cent to 60 per cent LTV.
Skipton Building Society has brought back seven-year fixes
Metro Bank has also been pretty aggressive with its range and improved proposition generally. It has five-year fixes at 65 per cent LTV from 1.84 per cent.
Skipton Building Society has brought back seven-year fixes, available from 2.4 per cent to 75 per cent LTV with a £995 fee, or 2.65 per cent to 85 per cent LTV with no fee.
HSBC now has the US on its approved list for ex-pat and overseas clients, which is good news. It has also rationalised the documentation it needs, which is great too.
It was good to see NatWest finally confirm its date for paying proc fees on product transfers, from 15 December. Shame, however, that it is at the lower end of the spectrum, at 0.2 per cent; a reluctant recognition of the work brokers do.
It was also interesting to see Nationwide enter the lifetime mortgage market, showing how much more closely some mainstream lenders are looking at this important area. That said, we still need more innovation in this space, and it is important that anyone looking at such a loan gets proper advice.
Finally, L&G’s report on The Value of a Broker is well worth looking at. There are loads of positives but it also highlights the many myths and misunderstandings that need to be addressed.
For example, 28 per cent of people thought the broker worked for the lender; only 45 per cent thought the broker would look at more products than the lender direct; and 15 per cent thought they would get a cheaper mortgage direct. Interestingly, 7 per cent said they did not trust fee-free brokers and less than 10 per cent would never trust a robo-adviser.
Work to be done my friends.
What really grinds my gears?
There has been a lot of talk about the new digital world. While I find it exciting and think we should all view it as a positive to make a broker’s job and the whole advice process quicker and smoother, I understand why there is also a fair amount of worry.
It doesn’t help when some of the commentary around this contains outrageous claims about the levels of business and what will happen in the near future. Some statistics look strange. Is there really £1bn-worth of mortgages ‘under management’? Can digital providers be the answer when they don’t have access to the whole market? And are they doing anything different from the more forward-thinking, established brokers that are investing in tech?
It smells a bit like the dotcom boom, with tons of money chasing a small part of the market. Not everyone can succeed. There are some leading contenders for success, such as Habito, but others making noise do not help and can confuse consumers.
Andrew Montlake is director at Coreco