Yesterday’s decision by the Monetary Policy Committee to raise interest rates will focus borrowers’, brokers’ and lenders minds and sharpen their pencils.
It is the first rise for months and it is unlikely to be the last. Rates may rise again at some point on the other side of Christmas when the Bank of England has holiday retail sales and pay increase data to inform their decision.
The decision however, in the short-term, has two very obvious ramifications.
The first is that advisers will have many concerned clients worrying about the impact of rate rises and how much of an increase may be coming down the tracks in the next six months.
The crystal balls may be a little dusty given the last few years but inflation is a reality and many will want reassurance that their mortgage costs can be contained. January 2022 will reportedly see over £39bn of mortgages up for renewal according to CACI.
Remortgaging will be a real prospect and requirement for many – as will product transfers which have already grown to record volumes in recent times owing to the need to refinance without further underwriting scrutiny.
The second is that many borrowers have already taken advantage of low interest rates and high LTVs to secure their mortgages and therefore the need for this kind of lending will not evaporate.
We of course have our own 95% loan-to-value (LTV) product range, recently reducing our rates (our 5-year fixed rate made Which’s Best Buy table sourced from Moneyfacts 1 November).
But I believe the market will need a solid supply of higher LTV lending for many years to come – and the Government would appear to agree as their continuing scheme to support 95% LTV borrowing continues to encourage this kind of lending in the broader market.
This market is a huge opportunity for mortgage brokers but one that too often gets forgotten as product transfers often mean the opportunities for clients re-mortgaging are lost.
We are now in November and many clients will need contacting with regards to their situations. Sensible pragmatic manual underwriting can afford borrowers opportunities when many might think remortgaging is not possible.
The pandemic has added to the complexity of obtaining a mortgage and issues such as mortgage payment deferrals and furlough mean advice has never been more important.
There remain a plethora of lenders and hundreds of products which make it bewildering for almost anyone other than a qualified expert.
Brokers have a huge opportunity. Client inertia should not get in the way of the best outcome.
