With a fall in house prices and little change in cost of funds, the public need to feel secure with their investments and expect the unexpected.
And so here we are. After a long, hot summer, back with a vengeance. There is nothing like a summer sojourn away to help you see things a bit clearer.
Most evident is the fact that, apart from the rest of Europe thinking we are mad, almost every political and economic decision being made at the moment is affected by Brexit.
I suppose that is to be expected given the size of the task at hand but it is a shame it is the case when we should be concentrating on other important things, like housing.
We now have our eighth housing minister in as many years. This is a role that needs continuity and an understanding of the market. We can but hope the latest, Kit Malthouse, gets some time to really make a difference. Unsurprisingly, I am not expecting too much.
Leaving all the guff and bluster from our politicians aside, there is still an expectation we will have a busy run to the end of the year.
It appears house prices have eased in many areas, with Nationwide reporting the August house price fall of 0.5 per cent is the largest since July 2012. That said, overall modest growth of one per cent to two per cent remains expected this year.
A softening of prices should mean more activity as buyers are enticed back to the market, and mortgage rates show no interest at all in getting any higher. People will want to feel secure ahead of full-on Brexit uncertainty next year.
We have seen little change in the cost of funds since the last rate rise and I suspect we are now looking at a relatively benign period for rates in general. Certainly, nothing should happen before we know more about Brexit. If anything, they may need to reduce again if no deal is made.
In the markets, three-month Libor has drifted back up to 0.8 per cent, while swap rates have risen a touch.
2-year money is up 0.12% at 1.12%
3-year money is up 0.11% at 1.23%
5-year money is up 0.08% at 1.37%
10-year money is up 0.06% at 1.57%
Meanwhile, the usual preamble is starting to build for the Autumn Budget. What will happen this time?
As has become the norm in recent years, now is the time for the different ideas to be fed to the public in an attempt to gauge some kind of reaction before a final announcement is made.
Help to Buy
The first of these seems to be whether Help to Buy will be extended or not.
Since its inception back in 2013, the scheme has had more than its fair share of criticism.
As time has worn on, this criticism has gained traction and is now reaching fever pitch.
There is no doubt there are many happy property owners (some 170,000 have been helped since inception) who would not have been able to get onto the ladder without it.
But it is interesting to note that, of this figure, one fifth were not actually first-time buyers at all.
It should also be noted that the average income of a Help to Buy applicant now stands at £50,000 (a staggering £72,000 in London), with critics saying it is therefore helping the wrong type of people.
Of course, the reason incomes have risen is because higher prices mean that only those with higher incomes can meet the mortgage affordability rules. You see the issue.
For all this, lenders and developers are very keen to keep it going as long as possible, and it does look like it will be extended another couple of years past the current March 2021 end date.
This extension may well come with various changes, however.
For example, we could see a change in terms of limiting the scheme to first-time buyers only, as well as a possible income cap for applicants or a reduction in the £600,000 upper limit for property values.
The good news is that lenders are increasing their supply of 95 per cent loan-to-values, with new players coming back into this market all the time and existing lenders reducing their rates.
Platform is the latest with a range up to a maximum loan of £350,000, including a five-year fix at 3.49 per cent with a £999 fee.
Whatever happens, perhaps now is a sensible time to start weaning ourselves off government support with schemes like this, before it really does become a drug that cannot be given up without serious withdrawal symptoms.
In other lender news, Sainsbury’s is reducing rates with its five-year fixed at 60 per cent loan-to-value, now 1.89 per cent.
Barclays has made some residency changes, with applicants no longer needing permanent rights to reside if they have lived in the UK for less than two years, as long as they are borrowing no more than 75 per cent loan-to-value and have a minimum income of £75,000 for a single applicant or £100,000 combined for joint applicants.
It has also increased the loan size cap on its 95 per cent loan-to-value products to £400,000.
Elsewhere, more lenders are now offering joint borrower, sole proprietor products, with West Brom, Newcastle and Bucks Building Society most recently joining in.
One Savings Bank is also providing some really good updates and notes on the buy-to-let market. There is more reform coming for houses in multiple occupation, with changes to licensing in October. Landlords will need an HMO licence for all properties with five or more occupiers and there is a minimum floor space being brought in.
The new guidance will recommend floor space be no less than 6.51sqm for a single adult and 10.22sqm for two adults sharing.
Finally, for those larger loans, Investec has launched a 10-year fixed buy-to-let rate at 3.69 per cent.
Hero to zero
- Brightstar Financial chief executive Rob Jupp and Atom Bank director of intermediary Maria Harris for their Mortgage Sleep Out Campaign – get involved.
- Accord for its fantastic series of podcasts and help for brokers.
- BDMs that go above and beyond the call of duty – thank you.
- Help to Buy: the time has come to radically change this or end it.
- Wonga – not many will shed a tear for its demise.
- Brexit non-negotiations – shambles.
What Really Grinds My Gears?
I have a lot of time for business development managers in general. Most of them do a pretty tough job and often go above and beyond the call of duty.
The other day, I thanked one for doing an amazing job when the odds were stacked against them. I received the following message: “Don’t be daft. It’s my job and I like getting a result, as it gives me job satisfaction and that’s a better feeling than anything.”
It is not just brokers who work hard for our clients. There are many people behind the scenes at lenders, networks, mortgage clubs and trade bodies who really care and have campaigned tirelessly for all of our benefit; most importantly, for the consumer.
Those that do things the wrong way – and yes, there are still some – I will continue to fight against in my own way. Not publicly, unless it merits it, but professionally and with respect to the industry I love. We will get there. Have faith.
Andrew Montlake is director of Coreco