It’s all about mortgages, mortgages, mortgages, as Abba once famously sang… oh, hold on… anyway, you get the point.
This week the Bank of England Money and Credit Report (March) showed that “UK homeowners borrowed a record £11.8bn more on mortgages than they repaid in March”.
The strongest level of mortgage borrowing since records began shows the insane effect of the stamp duty holiday on the property market.
But it isn’t just about that now. Even when the stamp duty holiday finally comes to an end, we expect the mortgage guarantee scheme to continue to support demand among first-time buyers, which will ripple up through the market and maintain a certain level of transactions.
Structural forces will also support transaction levels in the short-to-medium term because the pandemic has triggered a deep rethink among homeowners about what they want from a property.
The rules of the game have changed fundamentally and more people are finding themselves in properties that no longer suit their work lives. Only last week a government report showed more people were working from home, and that means more people will want a different home.
This will all have an interesting effect on our industry and how we transition to life back in an office, or whether we settle into a more flexible reality. Much of our industry is already used to this, with experienced brokers perhaps benefiting from the new world more than those in the early stages of their careers.
It is the training, sharing of knowledge, quick answers to questions and social interaction that are missed.
Healthy workforce
I was really interested to see and be a part of an excellent initiative from Jason Berry at Crystal SF and its Wellbeing Broker Survey 2021. Among other points it found that, since August 2020: there had been a growth in the percentage of people working longer hours; 25% of individuals never achieved a full night’s sleep; and the percentage of people indicating their mental health was troubling had more than doubled to 18%.
The large area of concern is that 73% of those surveyed indicated their company operated no strategy for health and wellbeing. In the new world we have to be more aware of this, and that a healthy workforce, in both body and mind, is good for everyone.
Apart from the fact we could be on the verge of war with the French over fish (standard) as they threaten to turn off the lights in Jersey, and BoJo faces some difficult questions over his mobile-phone number, his dec-orating receipts and the contracts for everyone he likes, (also standard), there is a lot of positivity around.
What Really Grinds My Gears?
MPs are an interesting lot, aren’t they? Hot on the heels of their vote on passing cladding costs on to tenants, and failing to sort that issue, along came mortgage prisoners.
The House of Lords — yes, I know, unelected etc, etc — decided to back an amendment to the Finance Bill that would cap interest rates at 2% above Bank base for mortgage prisoners sold down the swanny by the government with non-active lenders.
Tory MPs promptly argued against it and the amendment was defeated, dashing hopes of a transformational policy for many who are stuck.
I watched the whole debate in parliament and the assurances by John Glen MP that he was determined to find a solution felt hollow. Changes that have been made to date seem to have helped only 40 people and this would have been a good stopgap while other ideas were worked on.
It is hard to blame anyone other than the government for this situation and maybe it should provide a guarantee to lenders to help them lend to mortgage prisoners, as it has for first-time buyers. These are people, not assets, and something has to be done.
Pressing ahead
Everything now rests on the Covid vaccines and the hope that we can avoid the latest mutations. If this proves to be the case, the UK has an extraordinary advantage in pressing ahead and rebuilding our economy more quickly than many first envisioned.
This will lead to positive consumer sentiment, which drives everything and will see lenders once more move up the risk curve. I would imagine that most lenders’ books look relatively safe at present, and a little more sensible risk would be a positive thing.
The money markets show that three-month Libor is now at 0.08%, while the girl next door, three-month Sonia, stays at 0.05%. Swap rates have increased by a larger amount than we have seen for a while, though still not much.
Since the last column:
2-year money is up 0.05% at 0.32%
3-year money is up 0.07% at 0.48%
5-year money is up 0.09% at 0.73%
10-year money is up 0.09% at 1.07%
The new crop of government-backed 95% loan-to-value rates are all out now with pricing available between 3.73% and 4.29%, which is where we expected it to be. Applicants cannot borrow more than 4.49 times their income and must have a very good credit record to pass the lenders’ scoring systems.
With 14 lenders now offering products, there is at least choice available and this will only improve.
Enhancements continue from lenders generally with Nationwide the latest to return to accepting bonuses, overtime and commission as part of its mort-gage affordability calculation.
It is also great to welcome back industry stalwart CHL Mortgages to the lending arena, which is another positive sign for the market as a whole.
Conveyancing process
The biggest issue continues to be the conveyancing process as we approach the latest stamp duty cliff edge, and we are working with all our partners to ensure that every deadline possible is hit.
The sheer volume of applications going through is great for all brokers at the moment, but as such we are working hard to prioritise serious buyers.
Once the stamp duty first wave is over, the tense rush will calm, but I suspect the level of applications from those wanting to move or buy their first home will stay high, especially because mortgage lending will continue to improve as lenders become more confident.
A healthy housing market, with a good level of consistent transactions, is what we all want.
Finally, it was the end of an era at Dynamo as Ying Tan exited stage left (though not pursued by a bear).
Ying is a legend who always has time for people and has built a fabulous company. Anyone who follows him on Clubhouse or who has read his book knows that he has a wealth of inspirational guidance to impart, and we wish him well wherever life takes him next.
I’m sure he won’t be pushing too many trolleys — a lesson for us all.
Hero to Zero
Ying Tan – Dynamo supremo #legend
The return of CHL Mortgages
Barclays and Nationwide for green home initiatives
FCA fee spikes – there needs to be more open consultation around these
The cladding loan scheme – abolish it
MPs who voted to defeat amendment to cap rates on non-bank lenders for mortgage prisoners
