It’s March! The first quarter is nearly over and, before you know it, it will be springtime once more. Before that, though, we have the small matter of a coronavirus to get through, which threatens to derail the ‘Boris bounce’ with a very different kind of swagger.
Just when we thought it was safe to go back in the water and swim around in the mortgage-rich, clear waters of lending, along comes something else for businesses to concern themselves with. As if Brexit, trade deals, storms and floods weren’t quite enough!
The FCA has said that it expects firms to have “contingency plans in place” and no doubt it is suddenly a very real conversation in many firms up and down the country about what to actually do. Trying to get a bottle of hand sanitiser anywhere is already hard enough, let alone trying to plan for 80 per cent of your workforce being off sick.
As someone with more than a touch of OCD and a hand-washing fetish, if I see one more bloke walk out of the toilet without washing his hands, well…
The effect on the markets has already been intense, with some severe blows to the FTSE, while swap rates have also fallen, perhaps in anticipation of the possible knock-on effects for the economy as a whole. Let’s hope these fears prove to be ill-founded.
Positive signs
In sunnier news, Boris is expecting a baby (aah) and the property and mortgage market seems in fine fettle.
It was interesting to see the Bank of England’s Money & Credit data for January published this month, where a combination of Brexit lethargy in the closing stages of 2019 and Boris Johnson’s landslide general election win saw a major bounceback for mortgage approvals in January.
During November and the first half of December, many people sought to get their houses in order before the nation went to the polls. Once the election result was in, even more people started to make their move.
Homeowners and prospective buyers alike do seem to be wary of future house-price rises and are seeking to buy property before the market moves against them.
The big question is how long the ‘Boris bounce’ lasts as, while there is a sense of optimism at present, that could fade very quickly if trade negotiations turn sour. The hope is that Brexit is now firmly behind us, but there is still the potential for significant volatility as the year progresses.
The outgoing Bank of England governor Mark ‘unreliable boyfriend’ Carney stated that the latest decision on interest rates was closer than many thought. Although early data seems to be positive, the issues above remain and markets still appear to think that a rate cut is a real possibility.
The biggest talking point is around the Budget and what the new chancellor will do – or, more importantly, what he won’t do. Stamp duty changes are anticipated but the question is: which way will they go? Increase the nil-rate band to £500,000 for FTBs? Increase the tax for foreign nationals? Reduce the percentages at the top end? Continue to batter those with second properties? We will see soon enough.
Given all the prevailing talk about rates not going anywhere fast, as well as the economic fear that a certain little bug seems to be transmitting, three-month Libor has dived to 0.67 per cent, while swap rates have tanked faster than Trump can tweet.
Therefore, since the last column:
2-year money is down 0.10% at 0.56%
3-year money is down 0.10% at 0.55%
5-year money is down 0.10% at 0.56
10-year money is down 0.11% at 0.62%
In the mortgage market, Ami has been busy with a whole raft of subjects, including the FCA’s latest mortgage advice and selling standards report. While the headlines were all about execution-only and the horrors this could unleash on an unsuspecting public, on closer inspection this is not so clear.
In the latest excellent Ami Connect briefing, Robert Sinclair points out that the tightening of interaction rules means that it “is likely to make it easier for lenders to use execution-only for product transfer business but make it harder for fintech firms to avoid giving advice”.
Mortgage prisoners
Meanwhile, MPs are keeping up the pressure on the FCA over the whole mortgage prisoner issue. To be fair to the FCA, it was the government that put people in this situation by selling mortgage books to unregulated funds in the first place! Hopefully, we will soon have some more concrete proposals from lenders as to how they will deal with this.
The biggest news is something that we have waited a while for and has no doubt been the subject of many a Nationwide BDM visit, and that is its return to the interest-only market. I know other lenders have done this for ages, but it is still welcome to see Nationwide back in an important area of the market.
It will now do interest-only lending up to 60 per cent LTV with a minimum equity of between £200,000 and £300,000, dependent on where the property is. There is also a minimum requirement of £75,000 in income or £100,000 in joint income.
Competitive rates
There have been the usual rate changes, both up and down, from a host of lenders, and it is good to see that rates are becoming even more competitive at the 90 per cent LTV level. There are so many changes these days, many of which don’t stay around too long, that it is difficult to write them all down here.
Just as important are service levels, so I would be really interested to hear which lenders are quickest across the country from application to offer. For us, Atom Bank, Halifax and Nationwide are all averaging 10 days or fewer.
Finally, it was good to see that, on the back of the government’s commitment to spend £236m to battle rough sleeping, the great Mortgage Sleep Out is back this year. It’s a great chance to give something back and try to beat the incredible total raised last time out.
Will there be another charity single? I hear you ask. Well, you never know, but there have been rumours of the M.I.C. band dusting off their instruments…
Hero to Zero
Nationwide moving back into interest-only
Bank of England working on educational resources for schools called ‘Money and Me’
NatWest allowing mortgage deferrals for flood victims
Not enough industry thinking on sustainable/green mortgages
Building owners still without a plan to remove unsafe cladding
Viruses – wash those hands!
What Really Grinds My Gears?
Sustainability and the mortgage industry have unfortunately not usually gone hand in hand, especially given the reams of paperwork many lenders still require. One way of cutting down on this is for lenders and brokers to become much more tech-savvy and cut down on the paperwork still produced. Is it necessary to photocopy and print off a document to certify it these days?
We could also cut down on some of the baffling small print and myriad conditions in many offer documents or packs from solicitors that go in the post.
While some lenders have introduced greener elements to their products – such as Green Home Mortgages or LendInvest with their welcome Green Finance Initiative, giving borrowers cashback if they improve their energy efficiency rating – it is still only the Ecology Building Society that has long been committed to offering sustainable funding.
With the planet at the centre of much debate, surely our industry can come up with something more concrete and meaningful. As a start, let’s at least see lower rates available as a whole to those buying energy-efficient homes.
In fact, the best green mortgage idea will get a prize – who wants to sponsor it properly, other than a lunch on me? These days, that’s probably more of a disincentive – but hey, it’s a start.
