Market Watch: A Cool Head Required –

I used to write this column every week, which was both easier and harder.

Easier, as it was more about product and rate changes that had taken place the previous week; but more difficult, because sometimes not much was happening, week after week. Oh, for those days….

The past month has been another tumultuous passing of days, and sometimes it really does feel like one step forward, two steps back.

In the first couple of weeks, there was some optimism that the latest move in the Bank of England (BoE) base rate could mark the peak of the current rate hike cycle. Many were urging the Bank to enter a period of calm as inflation was surely about to begin its long journey to more acceptable levels.

The pesky underlying inflation rate didn’t read the script

After Truss’s chaotic policy, the markets had calmed down and we were starting to see people coming back into the market as they anchored themselves to the new normal in mortgage rates, reacted to the ever-increasing rental costs and were looking to buy in a weaker market.

With many rumors that the government may well return to on-demand assistance with a new type of purchase assistance program or similar, prices were likely to begin a recovery in the second half of the year. , and certainly before a general election.

In fact, Rightmove reported asking prices hit an all-time high, up 1.5% from the same time last year, amid semblance of market confidence that there would be neither recession nor slump in house prices has returned.

We’ve even seen the return of the 100% mortgage, courtesy of Skipton Building Society. Although I’ve had some concerns in the past with these products, the time seemed ripe for a new type of 100% mortgage, one that was carefully underwritten and where affordability was carefully considered. Granted, this won’t help everyone, but it will help some and shows a much-needed confidence in the real estate market.

The pre-election battle for housing has begun, primarily over the Greenbelt and housing targets. I hope there will be a reader for a new thought

With tenant demand hitting an all-time high, as reported by Paragon Bank, rental costs are rising and anything that can help tenants access the property ladder should be welcome.

This was, of course, before the latest inflation figures caused swap rates and thus mortgage rates to rise again. Although headlines showed that inflation was finally back below double digits, it wasn’t quite as much as expected, and the pesky underlying inflation rate didn’t read the script. In fact, he went on strike and refused to budge.

For some reason, inflationary pressures are more acute and persistent in the UK than elsewhere in Europe. Wondering why that might be? For the same reason we have a tight jobs market, truck queues in Dover, higher food prices and…. Well, at least I have my blue passport. It’s going pretty well, Boris, isn’t it? How are you, by the way? Oh….

Everything is in place! Three-month Sonia is up 4.13%, while swap rates soared

All of this shows how difficult it is to call the market, especially now, and those who waited, expecting an upcoming rate cut, are going to be disappointed.

So the mortgage chaos continues, reflecting the fact that the BoE came to the party too late, yet again. While nowhere near as bad as the mini-budget debacle, it is nonetheless a perfect storm where frenzied inflation headlines mix with a panicked BoE, which will no doubt go too far to trying to make a failing policy work, causing more problems when we need a quiet period.

So lenders have been pulling rates as swap rates have risen and while we understand the pressures, hopefully they can approach this situation more cautiously and with more forewarning than they are. did at the end of last year when they had no choice but to react quickly. According to Moneyfacts, since that time, 373 mortgages have been written off, representing nearly 7% of the market.

Two great guys doing great things for their companies and for the industry. This industry is wonderful

The mortgage market needs cool heads who put the customer first.

Everything is in place! Three-month Sonia is up 4.13%, while swap rates soared. From the previous column:

2-year silver is up 0.49% to 4.96%

3-year silver is up 0.48% to 4.73%

5-year silver is up 0.44% at 4.40%

10-year silver is up 0.37% to 4.04%

Meanwhile, the government and its opposition have launched the pre-election housing battle, mostly over the greenbelt, housing targets and who has the power to decide where and what to build.

The time seemed right for a new type of 100% mortgage; cautiously underwritten and where affordability has been carefully considered

To be honest, I can’t wait to see this battle unfold and hope there’s an engine for new thinking. So far, more ideas seem to be coming from the opposition, but there’s still a long way to go and that’s easier said than cost and done.

We also saw the introduction of the long-awaited Tenants (Reform) Bill in Parliament. It could abolish Section 21 eviction notices, give landlords more powers to evict “anti-social” tenants and set up a new property portal and ombudsman.

There have also been some interesting changes from lenders. Aside from Skipton’s 100% product, kudos to Nationwide, which has one of the first “green” initiatives with its additional 0% borrowing mortgage products. They are available for up to £15,000 and up to 90% loan to value over a fixed period of two or five years for green improvements.

The mortgage market needs cool heads who put the customer first

Halifax has made some positive changes to interest-only loans, with the maximum LTV available on the sale of a mortgaged property being increased from 50% to 75%. For sharing, the minimum capital will be calculated at the end of the term, not at the time of application.

Halifax is also increasing the qualifying LTV from 75% to 90% for an enhanced maximum loan amount when selecting a fixed rate of five years and over. For similar mortgage customers with no additional borrowing, who only receive employment income, up to 75% LTV at 5.5 times loan to income (LTI) may apply.

For employment only earnings of £50,000 to £75,000 and LTVs of 75% to 85%, the standard LTI is increased from 4.75 times to 5 times.

Accord has made a welcome decision when a customer’s property is downgraded and their LTV changes, meaning they are no longer eligible for the selected product. The customer will now be able to choose a new product either from the original product line upon application or from the newer product line, whichever suits them best.

Sometimes it really seems like a case of one step forward, two steps back

Accord is also improving its interest-only policy with the sale of the property’s maximum LTV increasing from 50% to 60% and partly and partly available to 85% LTV.

Meanwhile, Tandem has increased its maximum LTV for independent borrowers to 90%.

Finally, the Awards were held recently and it was another great event.

Of all the award recipients, I must say Mortgage Personality, Richard Rowntree of Paragon, and Outstanding Contribution, Martin Reynolds of SimplyBiz, were very worthy winners.

Two great guys who are doing great things for their companies and for the industry, and both have interesting backgrounds. This industry is wonderful.

This article originally appeared in the June 2023 edition of MS.

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