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June 1, 2012

Martin Reynolds is chief executive officer at SimplyBiz Mortgages

Well that’s May out of the way and what a whirlwind it was! What did we get from May and was it all bad news?

Let’s look at the high level news first. At the end of the month the International Monetary Fund suggested we reduce bank base rate even further. That was a surprise. But is it a good or bad one? I suppose it depends on whether you have clients who have a buy-to-let portfolio on bank base rate. I’m not sure this reduction will happen and at present I’m not sure what the real benefit would be. Surely whilst times are still difficult and insecure, reducing base rate further will cause more harm than good. Additional quantative easing will no doubt take place but the debate is, has that helped when previously used, or has it just helped shore up bank balance sheets? The stimulus is meant for the wider market but has not filtered through yet and I’m not sure it will.

May saw another month of the Euro constantly stumbling between crises, and we are still no nearer a clear resolution. We keep hearing about final talks at the latest summit, but it still drifts. Whilst it is worrying and will have implications for us all, I have stopped losing any sleep over it. It will happen when it happens and I will deal with the ramifications then.

Closer to home and the mortgage market has been just as busy. Multiple product and criteria changes from many lenders have kept us all on our toes. Not as many as in April it must be said, but it’s still the short notice times that cause irritation. Whilst sometimes it’s understandable it’s still frustrating. Could everyone not follow the Coventry model? If everyone did it may stop the application spikes.

April saw one potential lender unfortunately withdraw its Financial Services Authority application. This is bad news as we need new lenders in the market to stimulate supply and where possible add a bit of competition. Not sure at the moment where the next lender will appear from within the intermediary space. The FSA also grabbed the headlines in relation to lenders and interest only at the recent Mortgage Expo. The real context of the quotes are unclear but I am sure there is plenty of jockeying and lobbying going on in relation to the MMR final rules.

Add to that the FSA announcement on next year’s fees. Well that’s a blog to itself!

So what do we think June has in store for us all? More of the same I am afraid, although there are some positive chinks of light. Will the distractions of the Jubilee celebrations coupled with school half term and the start of Euro 2012 affect lending in June? The positive is that some lenders are reducing rates and are looking to attract new business. Whilst rates have risen during the last 12 months, they are still historically low. With certain lenders moving Standard Variable Rates there is a definite need to  talk to clients about remortgaging, interest only permitting . Do we think rates will go any lower or are we on the way up in general? That is where your experience should come into play in advising a client. Don’t be shy in giving that opinion. If you charge fees it is your experience and knowledge that they are paying for, not the ultimate product choice.

If June is going to be slower, what about the summer months? The Olympics will again have an impact but not as much as we are led to believe, unless you work in Central London. There will be many ups and downs in relation to products, lenders will still want business but it will be tough and challenging at times. The first half of the year has seen the tier two lenders step up to the plate and show an appetite to lend. They will need to balance service vs volumes though, and funding for the summer months.

Overall without stating the obvious, it is still very challenging out there and intermediaries will have to constantly adapt to these changes. I do though feel that intermediaries are the best people to explain these changes to clients. Keeping in regular contact with your clients has never been more important. Use the quieter summer months to create that first newsletter or to send a catch up email to your client bank. You never know what it will yield. Good luck.


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