While most of us are waiting to see what the Brexit decision brings, buyers may want to make their move now
There have been quite a few statistics out already showing the mortgage market has started 2019 pretty well. We know this is being driven by remortgages and first-time buyers, who are benefiting from Help to Buy, reduced landlord competition, a surprisingly decent jobs market and the Bank of Mum and Dad.
We have just seen confirmation of this, with UK Finance reporting the number of FTBs hit a 12-year high in 2018. According to the report, there were 370,000 new FTB mortgages completed in 2018, some 1.9 per cent more than in 2017. This is the highest number of FTB mortgages since 2006, when the figure was 402,800.
Despite the political landscape, people are realising they cannot put their lives on hold indefinitely and we have started to see a slow release of pent-up demand. It is also interesting to see that annual wage growth is now outperforming house price growth at the fastest rate since 2011. This means housing affordability is getting slightly better, which would usually help buoy the purchase market.
Although there still seems to be a disconnect between the expectations of buyers and sellers, it is considerably less pronounced.
It is a buyers’ market at present but that could change almost overnight in the event of a deal being struck with Brussels.
Many prospective buyers are waiting for more certainty but, ironically, it is the current uncertainty strengthening their hands.
They may be disappointed when they discover that this was the window of opportunity they were waiting for. The worry is that politics gets too fragmented to sort itself out and we are on the cusp of a major, generational change.
With chancellor Philip Hammond about to deliver his Spring Statement, it is hard to see exactly what he can do. In fact, there has been zero speculation so far, which shows just how low-key this event has become.
Looking at the construction, manufacturing and services PMI surveys this month, it is clear the economy is stagnating and not much will change until we have some kind of Brexit decision.
What really grinds my gears?
I was lucky enough to attend a roundtable earlier this month on technology and how the industry is likely to evolve. As someone with limited technical ability but an unhealthy interest in the area, it was highly illuminating. I listened intently to the eloquent, engaging and challenging founder of Mojo Mortgages, and was enthused about how much good work it had done in understanding consumers. Listening to someone knowledgeable like that made me realise just how much tosh some others are talking.
What worries me is the amount of money being thrown about as people panic to get in on the act. It worries me that some are bending the ear of the government to meet their own ends without really understanding the mortgage market itself. We need to be careful some of these firms do not cheapen our whole industry and lead to poor customer outcomes under the guise of advice. Let us hope the good firms continue and rise to the top.
The other growing part of our market is, of course, product transfers, which accounted for some £158.7bn in 2018. Added to the UK Finance total for the rest of the market, this means gross mortgage lending of £426bn. There is still much debate around this and whether it is actually lulling brokers into a false sense of security. Is it a triple whammy of pushing down the ability to charge fees, moving more people on to five-year fixes and lower proc fee rates that in a couple of years could disappear?
I would think carefully before taking the ‘easy route’ and maintain the message that these are fall-back positions if a better option is not available after taking appropriate advice, revisiting the term, payment method, personal goals and so on.
You only have to look at what has been happening in Australia to see how quickly things could change, with its talk of abolishing proc fees altogether. That said, it looks as though it will come up with a middle-ground solution.
Another story that caught my eye was that the differences in male and female salaries mean women take an extra two years on average to save for a deposit than men do. Looking at our own data, the average earnings we see on mortgage applications are £91,292 for males and £59,036 for females. This has obvious ramifications on borrowing capacity.
It is, of course, a difficult thing for mortgage lenders on their own to address. It would be hard to have separate income multiples for women and men. But what will help is that, as a society, we continue trying to break down barriers and not accept any pay difference in any industry between a male and female doing a similar job. I certainly hope my young daughter grows up in a world where this is no longer common.
In the markets, three-month Libor has dropped to 0.85 per cent, while swap rates have eased up a little.
2-year money is up 0.01% at 1.12%
3-year money is up 0.02% at 1.15%
5-year money is up 0.04% at 1.30%
10-year money is up 0.06% at 1.48%
It is good to see that innovation is alive and well, with Newbury Building Society’s Home Starter product of particular note. This offers a three-year fixed rate at 95 per cent loan-to-value, priced at 3.89 per cent, with the key being the loan is interest-only for the first three years, before reverting to capital and interest. It is a throwback to the old ‘low start’ mortgages. While this is likely to appeal to FTBs looking to minimise their outgoings in the early years, there are the usual dangers associated with such a product that buyers must be aware of.
Elsewhere, despite my comments on them above, well done to HSBC for getting its product transfer option out, paying the usual 0.2 per cent. It has come a long way in the intermediary space and is doing some good things. Halifax is offering £500 cashback to remortgage customers, while Barclays has reduced its maximum loans slightly on those above 85 per cent LTV. Barclays has also improved its already-strong buy-to-let offerings. Skipton also has some good changes and will now lend up to 95 per cent LTV on flats above some commercial, studio and ex-local authority properties.
After recent coverage, Natwest has changed its BTL policy and will now allow landlords who rent to tenants receiving benefits.
Coventry released some good growth figures underlining its continuing support for intermediaries, which is pleasing. Meanwhile, M&S Bank has apparently become one of the first providers to enable open banking-assisted mortgage applications.
For those who deal with expats, Ipswich has reduced its five-year fixed product to 3.99 per cent with a £999 fee, while Foundation Home Loans has released a five-year fixed rate, which will benefit from pay rate rental calculations but has a three-year early repayment charge.
Andrew Montlake is director at Coreco