For those of you old enough to remember the classic BBC sitcom Dad’s Army, it really is a case of “Don’t panic, Pike!” as the media explodes with news about imminent rate hikes, costs doubling and all that malarky.
Given the recent inflation figures and corresponding jump in SWAP rates, it is no surprise that we have seen lenders increasing their mortgage pricing.
It does now look like the era of ridiculously low rates is coming to an end, but the message is very much that we are still in a low-price environment overall.
First time for some
However, it is easy to see why this is such a big thing as, apart from a couple of small rate rises in 2018, we have not seen any sustained rate rises since way back in 2007. That’s a whole generation of borrowers, buyers, lenders, agents, brokers and regulators who have never experienced a rising rate environment before.
We have already seen the last of the five-year fixes below 1% disappearing into the ether, to be fondly remembered only by those who managed to grab such a historic product. Whether we will ever see their like again remains to be seen.
Those taking out a 1% fixed rate now, may be remortgaging at 2% or 3%
What is more, it is easy to see that those taking out a 1% fixed rate now, may well be remortgaging at 2% or 3% next time, so although rates will still be low historically speaking, proportionally it feels like a big rise.
While a small 0.15% rise to get back to 0.25% may act as a timely shot across the bows, we may still yet see the Bank of England hold its nerve until early next year if it does not want to do anything to upset any recovery just yet. Either way, the next Bank base rate announcement will be the most keenly watched for years.
For now, though, we look set to have a busy end to the year as buyers rush to grab these deals and clients rush to remortgage.
Remortgaging activity
The remortgage market looks like it will be exceptionally busy, and I was reminded the other day that next year will be five years since Digital Mortgages by Atom Bank released its, at the time extraordinary, five-year fixed at 1.29%. Doesn’t time fly, eh?
Meanwhile, the latest Budget was a very low-key affair as far as the housing market was concerned, apart from plans for £950m for the Home Upgrade Grant and £800m for the Social Housing Decarbonisation Fund.
The chancellor did also take the decision to extend the deadline for capital gains tax (CGT) to be paid on UK residential property from 30 days to 60 days.
For now, we look set to have a busy end to the year as buyers rush to grab these deals and clients rush to remortgage
Rishi Sunak fans were out in force again and you can’t help thinking that ‘Dishy Rishi’ would make an ever-so-good PM, especially when compared to the current incumbent.
In terms of the crazy kids at the money markets, they are living it up across the board; three-month Libor has soared 0.15% to 0.24%, while three-month Sonia has followed suit and is now up at 0.26%. They clearly think a small rate rise of circa 0.15% is imminent.
Swap rates themselves have also continued their recent rise.
Since the last column:
2-year money is up 0.53% at 1.23
3-year money is up 0.49% at 1.32%
5-year money is up 0.33% at 1.31%
10-year money is up 0.10% at 1.26%
Amid the latest flutter of rate rises there have been some interesting items worthy of note here.
HSBC has relaxed slightly its policy around variable incomes having to have been received from 1 January 2021 and replaced it with quarterly income having to have been paid in the last three months, half-yearly within the last six months and annual variable income within the past 12 months.
HSBC has also made positive changes regarding utilising rental income from background buy-to-lets.
Skipton has tweaked its income multiples up to five times for those with income over £80,000 borrowing no more than 75% LTV, and tweaked this at other levels. For Joint Borrower Sole Proprietor applications, it has increased the maximum LTV from 85% to 95%.
Simplified bonuses
Virgin Money has increased its maximum LTVs on new-build houses to 90% LTV and flats to 80% LTV. It has also simplified its bonus calculations, which are now based on the last year’s bonus at a rate of 60%.
There was also an interesting report from Rightmove, which found that after the stamp duty holiday, the average time for a property transaction to go through has dropped by 27 days. The average is still at a whopping 127 days though, so there is still work to be done.
A whole generation of borrowers, buyers, lenders, agents, brokers and regulators have never experienced a rising rate environment
It is also good to see another new lender about to launch. Quantum Mortgages will concentrate on professional landlords and provide some additional competition in a market that is strengthening once more.
As reported by BVA BDRC and Paragon Bank, there is a more bullish view around rental yields and the private rented sector as a whole.
Diversity report
Finally, it would be remiss of me not to mention the Association of Mortgage Intermediaries’ (Ami) Diversity, inclusion and equity in the mortgage industry report on our industry.
For too long we have shied away from the issue, finding the conversation too difficult or dismissing it as irrelevant. I am immensely proud that we now have the strength of character to face the issue. We need to make sure that everyone feels safe, included and welcomed at our industry events.
The latest Budget was a very low-key affair as far as the housing market was concerned
We have some real hope for the future, some real talent to let through our doors, and a real chance to make a difference to the lives and experiences of so many within this industry. As businesses, we are not only better when we have diversity of thought, but our clients will demand this of us, and we should demand it of ourselves.
I hope you all have a great month and, remember: “Don’t tell them your name, Pike!”
WHAT REALLY GRINDS MY GEARS
Writing this during the COP26 Climate Change Summit in sunny Glasgow where, according to one Scottish resident I know, they have been praying for global warming for years, has got me thinking about the whole green debate.
We know it is important, in fact essential, for us to reduce our carbon footprint and reduce emissions generally, and that there is a whole host of ‘stuff’ coming down the line into our industry from the highest levels of government.
This is one of the biggest topics of conversation at present, with pressure on lenders to ensure that their property stock is energy efficient in the future.
This needs to come from the very top and cannot be just a tokenistic, jump-on-the-bandwagon, tick-box exercise
What sort of rattles my cage is when we talk about so-called Green Mortgages, because let’s face it, there aren’t really any yet. At present we have just seen tinkering round the edges with nothing more than a very slight cost-saving for those who have more efficient homes.
There needs to be some serious banging of heads together to come up with a solution, and the onus should very much be on a sizeable Green Government Grant to help those who will not be able to borrow more funds to improve their homes.
Where we as broker firms are concerned, there is a whole new generation of clients who, quite rightly, expect to see their own values reflected in the companies they do business with, whether in the form of more down-to-earth communication, diversity of people and thought, or a real commitment to companies that look after the planet and are seeking to become carbon neutral.
This needs to come from the very top and cannot be just a tokenistic, jump-on-the-bandwagon, tick-box exercise, but a deep commitment to making a change.
HERO TO ZERO
The Ami Viewpoint Report into diversity, inclusivity and equity — food for thought for us all and something we need to act on
The Mortgage Industry Mental Health Charter — a great idea passionately organised by all-round hero Jason Berry at Crystal SF
Potential increasing rate environment brings both concerns and opportunities
The shortage of lenders adopting digital ID
I’m going to keep the cladding scandal here — there is still limited clarity
Andrew Montlake is a director at Coreco
