The intermediary sector grows stronger
Rob Clifford is chief executive at CENTURY 21 UK and a director at Moneyquest
To my mind the mortgage market has always been a rather incongruous one – many put this down to the sheer amount of data and analysis that swirls around it and the fact of course that our society remains obsessed with everything property-related. However, you would have sympathy for an outsider looking in because, let’s be frank, getting a clear and coherent picture of what is happening in our sector can be difficult to the untrained eye.
Take last week for instance. For much of the year most of the mood music around mortgage rates has been about product pricing being rock-bottom. ‘Rates cannot go any lower’, has been the mantra shouted from the mortgage rooftops to anyone who will listen. ‘Now is the best time to get the lowest rates’, we have heard. ‘If not now, then when?’ and ‘Don’t leave it until Base Rate rises’ have joined the familiar refrain of, ‘You’ve never had it so good’.
However, judging by the movement in prices in May, and the prospects going forward, rates can and will go lower (providing you have the right amount of equity/deposit and you meet the tightened affordability criteria); borrowers and purchasers could therefore be forgiven for holding on for a while longer (although let’s be fair the extra savings will be pretty minimal), and talk of impending Base Rate increases simply do not cut the mustard given that many have become accustomed to 0.5% per cent and can’t stomach the idea of a short-term increase.
The views of many commentators appears to have shifted based upon Co-operative Bank’s newly launched 1.09% two-year fix (60% LTV) and other rates like Barclays’ five-year fix at 1.99%. There is a distinct possibility that two-year rates are likely to drop below 1% in the near future, no doubt spurred on by the fierce fight between lenders for market share driven by the desire to show year on year book growth. Given the slower start to the year, it’s likely that the lending community will be going all out to secure increased levels of business throughout the rest of 2015, especially in that coveted low LTV borrower category.
But, what about those‘outsiders’ looking in? The first-timers for instance who may not know their SVR from their ERC when they begin their home-buying journey – what must they make of the conflicting headlines? On the one hand, we have talk of highly competitive pricing, of mortgage rate wars, calls to action and the like, but (in the very same week) they might have seen in one index that fewer first-timers are getting onto the ladder. Transaction levels fell from 60,900 in quarter one this year, down from 79,900 in the last three months of 2014 – it is the lowest quarterly total since the start of 2013 and appears to give the lie to the view that first-timers now have more options than ever.
Whilst theoretically this might be the case – two years ago Help to Buy had only just been announced and any thoughts of Help to Buy ISA’s or stamp duty reform seemed very far away – the real crux of the issue comes down to the availability (or otherwise) of high LTV mortgages and the enhanced affordability validation introduced by the MMR. High LTV loan numbers increased dramatically last year – largely off the back of HTB – but this momentum has not been maintained and, when you add in affordability and a constrained supply of properties coming to market, then you get a clearer picture of why the market might not be as accommodating of first-time buyers as we would all wish.
The real positive at present – for first-time buyers especially – is the strength of the intermediary sector and the fact that advisers are in the best possible position to give all kinds of borrowers, potential or otherwise, the reality of their situation. Headlines and media stories are never going to give you a true sense of what is achievable for an individual from the entire market, but advisers can and this is a USP that the intermediary sector should be shouting from the rooftops. After all, our market’s true identity is not really defined by analysis or commentary, it’s through our ability to get credit-worthy borrowers’ mortgage loans, or at the very least give them a clear idea of whether they can or can’t.