As brokers raise their game and more first-time buyers return to the market, the fundamental need for solid advice remains the same
So, it is February already; 2019 has started like a shot. But the brokers I have spoken to all over the country have enjoyed the welcome business and are cautiously optimistic about the year ahead.
And why not be positive? We have politicians and economists to do all the negative stuff. It is about time we remembered who we are, how great this industry is and how much people need good, solid advice in these trying times.
I write this on the day that, 25 years ago, I took my first tentative steps into the mortgage industry. A time of mortgage interest relief at source, five-year fixes flying out the door at 9.99 per cent and no proc fees at all. Oh, and the phone did not really ring unless we made it.
Don’t worry, I am not going to go all “when I was a lad” and “you don’t know how lucky you are” on you, but it is quite amazing to look back and see how far we have come. I have heard more than a few times over the years that the end of the broker is nigh but, each time, we adapt and get on with looking after our clients.
The new digital brokers that have come into our market promising to change the world and end advice as we know it, splashing large amounts of unsustainable cash in the process, have already changed their tune. However, they have already helped us all. They have helped generate publicity for mortgage brokers generally and made us raise our game.
Thinking about the sort of journey customers want and how we can use technology to speed up an antiquated system and smooth processes is a good thing. While this year will see more developments in this area, the basic premise remains the same: people want good-quality advice, which a basic decision tree-based algorithm just cannot provide yet.
Another continuing theme will be the battle between lenders and brokers for remortages and retention. Lenders are sending emails from “local branches” introducing themselves and offering to transfer without advice, which is fraught with risk.
Surely there must be a discussion on term, repayment method and future plans at this stage?
You know what really grinds my gears?
It is a bit early in the year still to be writing angry words and railing against the latest thing that winds me up the wrong way. Can we all try to leave the anger of 2018 behind us please?
Can we all try to work together that little bit more, rather than against each other?
We all represent one industry and how we portray it to both the public and the regulator matters.
There is room in this industry for all kinds of different business models; for lenders and brokers to work together; for healthy dialogue, discussion and debate.
Hopefully, we can present a united front to engage the public, to educate them as to the benefits and importance of professional advice, and grow the mortgage broking brand for the benefit of all of us.
Meanwhile, we continue to see a growing number of first-time buyers return to market. Early indications seem to suggest pent-up demand is starting to slowly be released, as potential buyers feel they can no longer put their lives on hold.
For many, the lure of a “buyers’ market” combined with mortgage rates staying low and the availability of schemes such as Help to Buy means they feel now is a good time to finally buy.
In the markets, three-month Libor is now at 0.91 per cent, while Swap rates have eased.
2-year money is down 0.06% at 1.11%
3-year money is down 0.07% at 1.17%
5-year money is down 0.09% at 1.26%
10-year money is down 0.13% at 1.42%
It has been interesting to follow the recent moves in Swap rates. With the Bank of England expected to keep rates on hold, especially as we enter the two-minutes-to-midnight period on Brexit, there seems no reason to do anything rash now.
In fact, the markets seem to suggest the chance of a rise this year is now down to 52 per cent from 64 per cent previously.
That said, there is still an eye on inflation, which is expected to overshoot the Bank’s 2 per cent target once more, as high levels of employment and subsequent wage pressure remains. This suggests there may still need to be a modest increase in rates sometime soon, with some reckoning they can see the bank base rate at 1.5 per cent by May 2020.
My message to clients remains the same: it is pointless putting off buying if you want or need to do so now. Brexit could go more than one way and, even with our politicians trying their hardest to make things messier than they need to be, there is a good chance now will be a better time to buy than after.
As with any deal, these things tend to be sorted at the 11th hour and, once there is certainty of any kind, you could see a bounce.
As far as our lender friends are concerned, apart from the usual start-of-year rate changes, we have seen a number of them try to improve their offerings. Most are making a concerted effort to listen to brokers about what clients really need and where the gaps in the market are. I will cover more of these changes in more detail in next month’s column.
Longer-term product transfer deals have started to appear, with TSB launching a 10-year product and Accord launching seven-year fixes. It will be interesting to see the take-up. Given where rates are historically, they may do better than you think.
Buy-to-let lenders have been working hard with The Mortgage Works, reducing some stress rates and introducing a 10-year fix at 3.24 per cent with early repayment charges for five years. Metro Bank, Vida and Kent Reliance have also made improvements to their BTL criteria, while Santander has introduced an interesting one-year fix at 2.25 per cent to 75 per cent loan-to-value with no fees. Leeds Building Society now has different products for small or large houses in multiple occupation, which is also interesting.
As for challenges, it pays to look across the world to see what could be lurking underneath the surface and remind us not to take things for granted. For instance, Australia is going through changes in the mortgage industry and one recommendation that has popped up concerns broker remuneration: “The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending.” Food for thought.
Andrew Montlake is director at Coreco