While the Spring Statement was pretty much what the Chancellor promised – dull with outbreaks of nothingness – the latest Bank of England Monetary Policy Committee Meeting was much more exciting and gave a further indication on the future path of interest rates. Things are starting to get tense as two members are now voting for an immediate rise.
In fact, one member of the MPC went a bit further, with Gertjan Vlieghe stating that we are likely to see “one or two” rises each year, with rates reaching 2 per cent by March 2021. This view is given weight by the fact that wage growth is starting to pick up. Official figures showed that average earnings were 2.6 per cent up in the three months to January. This is the quickest pace of rises since 2015.
Although inflation did drop to 2.7 per cent, this is still above their 2 per cent target and wage rises will put more pressure on this.
Expect the unexpected
The spanner in the works, however, (spanner is an apt term in this context), could be coming not just from Brexit but from Mr Trump across the pond. His latest protectionist view and imposition of trade tariffs against the EU and China will no doubt be met with a tit-for-tat response that could threaten economic growth and force inflation back up. As for a new Cold War blowing in from the East, who knows where that could lead.
After a strong January in the mortgage market, UK Finance estimates gross mortgage lending in February to have been 4.9 per cent more than a year earlier but below the monthly average of £21.4bn for 2017.
While first-time buyers are replacing new landlords and remortgages are predictably strong, part of the issue is that people are just not moving as many times as they used to.
Higher prices, affordability issues and of course stamp duty adding to the costs are all making people think twice. According to research from Savills, before 2008 homeowners moved 3.6 times on average after buying their first property, now it is just 1.8 times on average over their lifetimes.
Although house price growth is cooling, now at 2.1 per cent according to Nationwide, and is especially subdued in London overall, this is still growth. What we all need is more available property, more realistic prices and more transactions. This is needed to improve labour mobility and the economy in general.
In the markets, three-month Libor has been steadily increasing for a while now and is now at 0.69 per cent, which is a real sign of the current environment. Swap rates, however, have been more changeable, rising and falling each week over the past month.
- 2-year money is up 0.10% at 1.12%
- 3-year money is up 0.05% at 1.23%
- 5-year money is down 0.03% at 1.36%
- 10-year money is down 0.14% at 1.51%
Going back to the whole technology debate, brokers seem to have nothing to fear from certain lenders as they struggle to get their systems right to even accept applications from brokers.
We all understand that nothing is as simple as it seems, especially where tech is concerned, but you do really have to wonder when things go so wrong. When back office staff don’t have a simple override system to change things or move them forward, clients are left unable to get a valuation or obtain a product transfer in time, which risks the property they are buying or leaves them out of pocket, it is hugely frustrating.
With the amount of money being spent by lenders on these systems, more interaction with brokers at the development stage would be useful. Of course, every new system ‘breaks’ to some degree when launched and all we can do as brokers is try to remain calm and give them time to fix their issues.
Criteria and rate wise it has been the usual period of change as lenders jockey for position and deal with the rise in the short-term costs of funds and try to balance pricing, market share and service.
Santander, which has made a real effort recently, will now lend up to 5.5 times income for those earning more than £100,000 up to 75 per cent LTV.
Halifax has made its own tweaks and will now lend 4.49 times income over £500,000, which is great news. It will also lend 5x income on loans up to £500,000 where the clients jointly earn £75,000 up to 75 per cent LTV, as well as allowing interest-only on loans up to £5m where the client has a suitable repayment vehicle.
As part of its new, ring-fenced bank, Barclays’ variable rate products will now track the Bank of England base rate rather than the Barclays bank rate, which means we don’t have to go through convoluted explanations to clients on the differences. Barclays has also made improvements to its maximum income multiples.
Still on the affordability theme, Accord has increased the amount of bonus it will take into account from 50 per cent to 60 per cent. HSBC has allowed
brokers access to its 95 per cent LTV products, which is great news, part of the market that really needs proper advice. Its rates start from 3.49 per cent for a two-year fixed with no fee and free valuations.
Precise has introduced interest-only options for its residential products, BM Solutions have a funky new mortgage portal, including document uploads, and Clydesdale Bank has direct access to underwriters on their large loans. Coventry customers can now borrow up to £2m and they have also made some LTV improvements, while Metro Bank is launching in Scotland.
Meanwhile, as the BTL market comes to terms with the new rules on Energy Performance Certificates, TMW have said they will still lend on the lowest energy efficiency rated properties, but the costs of bringing the property up to E-Grade will be reflected in the valuation.
Finally, it was good to see Virgin Money start an intermediary Twitter feed. The more on social media the better, I say!
Hero to Zero
Santander, Halifax, Barclays and Accord’s recent affordability and income multiple changes
HSBC introducing 95 per cent LTV mortgages through brokers
FCA’s positive comments on Retirement Interest-Only Mortgages
Lenders’ issues with IT systems which have affected customer outcomes and service
President Trump’s protectionist stance leading to a new trade war
Builders threatening to take incentives away if in-house broker is not used
What really grinds my gears?
With the FCA’s Competition Review going on it is an opportunity to look at some of the practices in certain areas. While I believe that the mortgage industry does not have huge issues, a builder admitting that they would not allow buyers access to their incentives if they did not use their broker is unfortunate, to say the least.
It is perfectly reasonable to have a preferred supplier of mortgages, especially in new-build where transactions move quickly and knowledge of the market can make all the difference. For agents, insisting that a chosen expert qualifies the buyer is also acceptable; in fact, the agent has a duty to qualify offers as real.
What is not acceptable is any insistence on a consumer having to use an in-house broker and threatening to withhold incentives, not put offers through or anything similar. There are many exceptional brokers and the client has to be allowed to make their choice free from any kind of pressure.