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A Word On The Mortgage Market

Hello and welcome to March’s edition of A word on the mortgage market. To say we have much to discuss would be an understatement of significant proportions. Since last we met, there’s been a raft of relevant news (and not the type of raft many of us could use right now given it’s been pouring down for what feels like an eternity).

We’re going to spend some time highlighting the important wider news, before giving our thoughts on what this means for you and your mortgage. After all, that’s why you come here. 

The big picture

 Let’s begin with inflation

The bane of all our lives, well one of them at least, is inflation. As you’ll no doubt be all too aware, it’s been rampant for quite some time now. But recent news has revealed an expectation that it with fall significantly, on both sides of the pond, in the coming months.

Last week, the US announced a slight fall in their inflation to 6% (down from 6.4%) in the previous period, but in the UK it’s gone the other way. Jumping from 10.1% in January, to 10.4% in February, the blame was laid (at least in part), at the door of salad and vegetables. Perhaps the first time such inoffensive consumables have been highlighted as an enemy of the state.

There is still a widely held perspective that this was a blip and that inflation will fall throughout 2023. We live in hope.

The Spring Budget

To be honest, from a mortgage perspective, there’s not much to see here. Please move along.

The Banking Crisis 2.0

The real news at the end of last week and the start of this one came from the collapse of several banks. In the US, a couple of banks who were heavily focused on the tech sector capitulated, briefly sending panic through the market. Yet it was the imploding of Credit Suisse that really got everyone jittery. Stock markets reacted badly at first but bounced back.

Although we are highly unlikely to witness a full-on banking crisis, such as the one we saw in 2008, we are at a critical junction. How central banks react to this and the measures they take are likely to go some way to defining the financial outlook for months to come. Which is the perfect segue to what is to follow.

Interest Rates

In Europe, the ECB went ahead with a half a per cent rate hike last week, although they framed that in their press conference by stating that they would be ready to take immediate action if needed. Their rationale was two-fold. Firstly, they were determined to fight inflation, which remains way above their target. And secondly, any prospect of a banking crisis was receding as banks were in a much better financial position in terms of capital and liquidity than they were in the last financial crisis. Stateside, the FED went with a 0.25% rise earlier in the week.
 
Closer to home, the Bank of England’s Monetary Policy Committee decided to raise interest rates yesterday, but only by 0.25%. Primarily, we believe, as a response to inflation. It now sits at 4.25%. The general feeling a few weeks ago was one final 0.5% increase, so we guess that a quarter point rise is some sort of bronze lining. It still feels just a tiny bit too early to call this as the end of the rises, but we wouldn’t be surprised if it was. As always, watch this space.

Swap Rates

As you know, there has been an expectation on the journey of the main rates for quite some time now. But, when it comes to mortgages, we like to look more closely at Swap Rates (the rates at which lenders lend to each other and a key determiner of mortgage rates) to map their path. 5-year swaps have been hovering around the 3.6% mark for quite some time now. Over the last few days, they have edged down a little, and now sit at 3.59%. But given all of the above that’s not a surprise.

What does this all mean for mortgages?

Despite the overall ship feeling a little wobbly, mortgage rates have been steady for quite some time now. Relatively speaking. The best five-year fixed rates can be found below 4% if you have a decent deposit or equity. In the two-year market, that figure is a little higher at 4.3%.

In the two-year discount and tracker market, starting rates are a little lower. Many of our friends in the UK’s building society market are offering 3-3.5% discounts from their Standard Variable Rates, which give a pay rate of around 4.1% (although these ay well rise al little to follow the path of bank rate). So, if we have reached the peak of bank rate, or even if there is a smidgeon more to come, these look like offering pretty good value.
 
There are over 1.4 million mortgages coming to the end of a fixed rate in 2023 and with the general volatility we are all witnessing it’s never been more crucial to stay in touch with your adviser.
 
Not only are they able to advise you whether to remortgage, or simply switch to a new mortgage with your current lender, they are able to secure the best rate at the time. And they can even change to a better rate at a moment’s notice as they have access to the lenders most up to date products every minute, of every day.
 
Finally, as always (and you are probably a tad bored of us saying this) no amount of generic advice will do. So, talk to your adviser, who will go through your own unique circumstances to help find the best solution for you. 

The importance of financial protection

If all this news and horrendous uncertainty tells us one thing, it’s that being protected come what may is crucial. 

So, a very gentle reminder that if you find yourself without protection, we can help. The key policies we offer are:

Income Protection
A policy that provides a regular, tax-free income if you are unable to work due to sickness or an accident.
 
Critical Illness Cover
A policy that pays a lump sum that helps to pay off your mortgage if you are diagnosed with a number of specific critical illnesses, including heart attacks and cancer.
 
Life insurance
A policy that pays out either a lump sum or a series of payments should you die during the term of the policy. Normally, the payment is tax-free.

It's good to talk

We very much hope you've found A word on the mortgage market useful and interesting.  If you'd like to discuss anything we've talked about, or indeed if you have any other mortgage related needs, then please do get in touch with your adviser. Until next time, we bid you adieu.

Your consulting firm: Home Counties Mortgage Protection and Finance Ltd

Give them a call:          01332 900 789

Send them an email:  Info@mortgageforce.co.uk

Quoting:                         Home Counties

All that legal jazz

We should also remind you that if you have an interest-only mortgage please make sure you have a suitable and viable method to repay your mortgage at the end of the term. And some of the products contained in this newsletter are non-regulated, such as Buy to Let mortgages and, accordingly, the protection that is normally afforded on regulated products do not apply.

Interest rates may go up as well as down. Make sure you can afford your mortgage repayments and review your budgets frequently. Should you experience or foresee any difficulties, speak to your lender immediately. For advice in relation to your circumstances on a specific matter, please ask us for a personal illustration.

Fixed mortgage rates hit six-month low!

The latest Moneyfacts UK Mortgage Trends Treasury Report data shows that the overall 2-year fixed mortgage rate is 0.32% higher than the 5-year equivalent, the largest difference in 15 years.

Both rates are at their lowest levels in six months, after four consecutive months of declines.

Product choice has increased slightly to 4,372 options, up from 4,341 in February 2023. Within individual loan-to-value (LTV) tiers, the 60% LTV tier’s availability reached its highest level on Moneyfacts records, rising by 51 to 657.

The average 2- and 5-year fixed rates fell month-on-month for the fourth consecutive month, down to 5.32% and 5.00% respectively.

The average Standard Variable Rate (SVR) continued to climb, reaching 7.12%, the highest rate since April 2008 and the first time it has breached 7% since October 2008.

Rachel Springall, finance expert at Moneyfacts, said: “The momentum in the residential mortgage market is positive, as fixed rates fell and product choice stabilised month-on-month. Lenders have continued to reduce fixed rates, with the average 5-year fixed rate resting below the equivalent 2-year.”

We will not see low interest rates within the 1.50% for some time, but rates are slowly coming down. It is important to obtain the lowest rate for you in your circumstances.

So, if your mortgage product is due to renew very soon, contact Home Counties Mortgage Protection and Finance Ltd so we can help review your next deal saving you a huge amount of time shopping around and hopefully a lot of money too. Go to the Contact US page on this website.

Source: The Intermediary Daily News Round up Tuesday 21/03/2023.

How we can help consumers cope during the cost of living squeeze

Sheldon Mills

Executive Director, Consumers and Competition

The FCA is working hard to make sure firms treat customers fairly during the cost of living pressures.

The days may be getting lighter, but the nights are still far too long and sleepless for many as they contemplate the heavy burden of the cost of living.

Rising bills mean many households have already cut back on non-essential spending. Many feel they have little left to cut.

Families that would once have described themselves as comfortable are bracing themselves as they face higher mortgage or rental costs.

Those worries are compounded for those who on low wages who were already struggling.

As people face these financial challenges, we have a vital role to play, along with the firms we regulate. We can’t change the economic circumstances, but we want to maintain a flourishing UK financial sector: One where customers are treated fairly and supported if they get into financial difficulty, get fair value, and are equipped with the information they need to make good decisions.

Our upcoming Consumer Duty comes into force in the summer. It will set a higher level of consumer protection and require firms to deliver good outcomes for customers. Firms should be stepping up now to support customers in these tough times.

Supporting customers in financial difficulty

Given the current cost of living squeeze and rising interest rates, we are concerned that people may struggle to meet their payments. Our research shows that even back in May last year, 4.2 million people had missed bills or loan payments in at least three of the previous six months. 

"We want customers to be able to borrow at a rate they can afford to repay and to be supported if they get into financial difficulties."

In line with our three-year strategy, we have set out the standards we expect firms to meet when supporting borrowers in financial difficulty and are holding them to account.

This support means people who are struggling to repay their loan, mortgage, credit card or overdraft can get help based on their circumstances.

We expect the lenders we oversee to work constructively with those who fall behind in payments, or are at risk of doing so, so tailored support can be put in place.

We’ve seen lots of examples of good practice of this, for example, firms contacting borrowers when issues are on the horizon. But we are supervising firms closely and intervening where we are concerned that they are not acting in their customers’ interests.

We told 32 lenders to make changes to improve the way they treat their customers and by November last year, seven had agreed to pay £12 million in  compensation to nearly 60,000 customers. 

Opening up conversations

Buy Now Pay Later concerns

Helping consumers make good decisions

Taking action to stop harm 

"We can’t insulate consumers from the impact of rising prices and interest rates, but where we find it, we will tackle bad practice."

A Word On The Mortgage Market

Hello and welcome to the first A word on the mortgage market for 2023. It’s probably (definitely) too late to wish you a Happy New Year, but as this is the first time we’ve made our way into your inbox this year, we’ll do it anyway. Happy New Year.

As always, we have much to discuss. This month we're looking at mortgage rates, the debate on fixed rates versus trackers, why you shouldn't just accept a lender's offer on product transfers, and the rise of second charge mortgages and their very real benefit for many borrowers right now.

So, without further ado, let’s get to it.

Mortgages as Bank Rate hits 4%

Yesterday, The Bank of England voted to yet gain increase Bank Rate, pushing it to 4% for the first time in many years. As we keep saying, these rises are not unexpected, so please don’t panic.

Given the grief that the Bank has received from many corners that they simply did not act quickly enough in this interest rate cycle, it’s not surprising that they are flexing their proverbial muscles now. The latest market wisdom suggests that Bank rate may hit 4.5%, although some commentators are suggesting we may have hit the peak.

 
As is normally always the way, this rise has been factored in by the market and mortgage lenders, so we are not expecting to see swathes of products being pulled and rates rising. We prefer to look to Swap rates to give a better indication of the direction of travel on mortgage rates, and they continue to edge downward. When we spoke to you last, just before Christmas, 5-year Swaps were at 3.7%. They now sit at 3.5%. This movement has been mirrored in the fixed rate mortgage market, with rates slowly coming down. 5-year fixed rates can be obtained for a smidgen over 4% at the time of writing.

Fixed vs Tracker

One of the questions we are increasingly being asked is whether fixed rates still present the best value for borrowers or whether there is better news to be had in the tracker and discount markets. It’s impossible to answer this generically, but there are certainly a range of products that look worth consideration. And the good news is that some of them come with no Early Redemption Charges, so you can drop out of those and lock into a fixed rate in time should that prove to be a sensible approach to take. As always, as self-serving as we know it is, only a good adviser will be able to provide you with the right advice.

Did Someone Say Price War?

We are already seeing that lenders have realised that their business pipelines have reduced dramatically and, instead of putting up rates to stop the flow of business, they are cutting rates to attract new business. Several of our lenders have described this as a price war. They’re probably overdoing it there. Maybe a battle. At least for now.

Don’t Accept A Lender’s Offer To Switch

Given those aforementioned reduced pipelines, many lenders will try and grab a quick win by offering you a product transfer rate that suits their appetite. But the chances are, there will be better rates in the wider market for you. In our second self-serving statement, speaking to us before you do anything makes sense. If we think you are being offered the best deal for you then we’ll tell you that. But if we think that you can do better. Well, you get the picture. It’s a minefield out there, so getting advice that’s tailored to you and you alone is crucial.

The Rise Of Second Charge Mortgages

We have previously spoken to you about second charge mortgages. We get that they sound like a bad thing (they could do with a rebrand), but they are really coming into their own right now.

They offer genuine value for those that need to raise extra funds but don’t want to give up the comfort of a great rate on their main borrowing. Of course, it’s all very well and good us saying this, but perhaps an example would help to show you why.
 
We recently helped a client raise a further £60,000 on their borrowing for home improvements. They had an existing fixed rate of 1.26% on a mortgage of £600,000. If they remortgaged away from that rate, they could expect to be paying around 4.5% for their total borrowing. However, they took the additional borrowing of £60,000 on a second charge rate of 11%. That double digit figure may make your eyes water, but when you combine the borrowing together, the amalgamated rate they are paying across both products is 2.15%. And that’s considerably better than 4.5%
 
To be clear, this is a high-level example. There’s lots of complicated maths that goes into the process and, as always, only specific advice for you will do. But hopefully it shows you that a little bit of creativity can make a big difference. Certainly, some food for thought.
 
That’s it for this edition, other than to say do keep in touch with your adviser. You can, as always, find their details at the end of this email. See you next time.

It's good to talk

We very much hope you've found A word on the mortgage market useful and interesting.  If you'd like to discuss anything we've talked about, or indeed if you have any other mortgage related needs, then please do get in touch with your adviser. Until next time, we bid you adieu.

Your consulting firm: Home Counties Mortgage Protection and Finance Ltd

Give them a call:          01332 900 789

Send them an email:  Info@mortgageforce.co.uk

Quoting:                         Home Counties

All That Legal Jazz

We should also remind you that if you have an interest-only mortgage please make sure you have a suitable and viable method to repay your mortgage at the end of the term. And some of the products contained in this newsletter are non-regulated, such as Buy to Let mortgages and, accordingly, the protection that is normally afforded on regulated products do not apply.

Interest rates may go up as well as down. Make sure you can afford your mortgage repayments and review your budgets frequently. Should you experience or foresee any difficulties, speak to your lender immediately. For advice in relation to your circumstances on a specific matter, please ask us for a personal illustration.

By Becky Bellamy 30th January 2023

The average of the lowest fixed rate mortgages has plummeted as a mortgage price war takes hold, L&C Remortgage Tracker data reveals.

The data found that the top ten lenders’ average of the best low loan-to- value (LTV) two- and five-year remortgage rates have dived since the peak in November.

The average two-year rates have fallen from a peak of 5.90% in November to 4.67% today, while five-year rates have dipped even further, to 4.32% from 5.67%.

Borrowers could now benefit from payments over £100 per month lower for a typical £150,000 repayment mortgage over 25 years.

For a two-year fixed rate today, borrowers would pay £1,308 less per annum and £1,415 less for five-year rates compared to only a few months ago.

Lender standard variable rates (SVR) continue to climb with the average of the top ten lender reversionary rates now standing at 6.73%.

This would cost homeowners almost £2,600 more per annum than the five- year fixed rate of 4.32%.

L&C says with another base rate rise expected this week variable rates are likely to climb higher still.

The market suggests that the rollercoaster ride for mortgage borrowers continues, and many may have lost track of how much-fixed rates have improved since the pandemonium following the mini-budget. Funding conditions have improved and as lenders compete harder for mortgage business a price war has broken out, sending fixed rate costs plummeting. As a result, the cost of the current best-in-class fixed deals is potentially thousands per annum lower than just a few months ago.

That said, rates remain higher than the lows of recent years and those coming toward the end of a fixed deal will need to plan ahead. However, we expect rate cuts to continue even though another base rate increase could come as early as this week.

Once again, Home Counties Mortgage Protection and Finance Ltd can look to help and assist new and their existing customers to explore these potential savings now, or in the future.

Source L&C and Becky Bellamy 30th January 2023

By Becky Bellamy 30th January 2023 - Mortgage Strategy.

While 155,000 home sellers could be impacted by a drop in house prices, a period of house depreciation is only likely to last a matter of months before the market rebounds, the latest data from GetAgent.co.uk reveals.

After analysing property market data going back to 2005, their research shows that there have been 32 periods of house price decline across Britain.

It found that the majority of these have been singular monthly declines, with the worst lasting 10 months.

On average, these periods of decline have lasted just 2.2 months, with an average of 154,704 transactions taking place.

GetAgent says “an estimated 69,766 home sellers per month are thought to have been impacted by falling house prices”.

However, there have also been 32 periods of buoyant house price growth.

These have lasted 4.4 months on average, with the longest running for 19 months in 2015.

During the more buoyant periods, an average of 381,452 homes were sold.

In these periods, an estimated 85,961 home sellers per month benefitted from appreciating property values.

The research found that the average period of house price decline lasts 2.3 months in England compared to an average of 4.6 months when house prices have climbed.

GetAgent.co.uk co-founder and chief executive Colby Short comments:

“Last week’s UK House Price Index revealed the first signs of a house price downturn, with the monthly rate of growth dropping for the first time since October 2021”.

“This may understandably come as a cause for concern for the nations home sellers but the chances are they have nothing to worry about in the long-term”.

“The property selling process is a protracted one and as our research shows, any period of downward price movement is generally short-lived, not to mention often marginal”.

Of course, historic data can only provide insight into the past performance of the market and it certainly doesn’t provide a guarantee of future market trends. But while we may have seen a slight reduction on a month-to- month basis, the overall market is still in very fine shape and sellers remain in a very strong position as a result.

So, if you are thinking of moving and need to plan your next move, or need to Remortgage soon, contact Home Counties Mortgage Protection and Finance as soon as possible to explore your options.

A (Christmas) Word On The Mortgage Market

16th Dec 2022

Hello and welcome to the last A word on the mortgage market for 2022. Yet again (it is becoming a painful habit) it has been a challenging year. Those of us in the world of mortgages will never forget those few weeks after the disastrous mini budget when the market more or less imploded. And we are all very much looking forward to a little (only little) break over Christmas to recharge the batteries and prepare to go again next year. Thankfully, next year is looking like it will be better than the last. And there is more on that to follow.

Before we go (briefly) into that, we just wanted to take the opportunity to wish all of our clients a very Merry Christmas and a Happy New Year. It has been, despite the aforementioned challenges, a pleasure helping you with all your mortgage needs and we very much look forward to doing more of the same next year.

So, What Does The New Year Look Like?

Firstly, and most importantly, we think it looks better. let us start with Bank Rate. Just seven weeks ago, many (so called) experts were predicting that Bank Rate would make it to the heady heights of 5.5%. But now, it is more or less universally agreed that Bank Rate will not get above 4% and, indeed, may not even reach that high.

You will no doubt be aware that last Thursday the Bank of England's Monetary Policy Committee voted 6-3 in favour of increasing the Bank Rate to 3.5%. But the good news is that this was completely expected, by both the markets and UK mortgage lenders so we are not expecting widespread product withdrawals and increases in mortgage rates. If we take a little peek (although it is Christmas and peeking is very much frowned upon) at 5-year Swap rates, they are currently at 3.7% and have been slowly falling for a little while now. This is good news.

Secondly, we have been talking to many lenders across the UK and discussing their appetites. Not for turkey and sprouts, but rather how much lending they plan to do next year. The short of the matter is that mortgages are profitable for them, so they really do want to lend. Between us and you, several lenders are already concerned

about their peers stealing a march on them, so this means a competitive market is really likely. And that is only good news for borrowers.

Lastly, we think there is a very real possibility of some government stimulus in the housing market in early 2023. Let us be honest, the government has taken a bit of a drubbing recently and they will want to do all they can to try and improve their perception. What that might look like is hard to tell right now, but we think we can expect something, and it may well be the kitchen sink.

The Great Fixed Rate Roll Off.

Before we leave you for the year, it is worth nothing that a staggering 50% of all fixed rate mortgages will expire in the next 18 months. So, the chances are, a good many of you will be in this situation.

Whilst no amount of generic advice will do right now, there is one thing we urge you to do. And that is stay connected with your adviser. They will instinctively know what is right for you and when the right time to make a move is. Remember, many rates can be booked up to six months in advance. So, whatever you do, do not leave it too late. Which reminds us, we really must get that Christmas shopping finished.

So, on that note, we will bid you adieu for 2022. In the words of Sir Paul, we wish you a Wonderful Christmastime. See you on the other side.