After what seemed like months of grey clouds and rain, I was somewhat confused to see a yellow ball in the sky from which emanated a strange kind of warmth.
As if to a mating call, it seemed like thousands of people headed out like lemmings to gather in outside bars, on beaches and around the M25, despite muted calls for restraint from some of those worried about the dreaded third wave.
It is extraordinary what a bit of sun does in dear old Blighty. And, if we can indeed keep the new Covid variant at bay, have some prolonged good weather and, dare I be the first to suggest, manage a successful Euro tournament for the Home Nations, the economy will be rocking again.
The question, though, is for how long? Coming out of the pandemic, if we really do this year, leaves behind a host of issues that need to be taken care of.
Cornelian dilemma
What we really need is a strong political leader, but we don’t seem to have anyone in sight. As the Cummings circus reminded us, the choice between Boris and Starmer is pretty stark — although, to be fair, better than the Cornelian dilemma of choosing between Boris and Corbyn.
It is extraordinary that, even after the bashing of Boris, his poll numbers continued to rise. His next move, as we tiptoe around an end to social distancing, is extremely important to judge correctly.
Meanwhile, the UK property market continues to show that it has no understanding of economic logic. The economy is deeper in the red than ever, yet house prices are rising at an astronomical rate. Nationwide reported an astonishing 10.9% annual growth rate in May, to a new record average price of £242,832. It’s a real-life Theatre of the Absurd.
And yet, the play may carry on for some time. Although the stamp duty holiday has tailed off as a driver of transactions, people these days want something altogether different from their properties, namely space and a home office.
The demand for a new type of home, coupled with the government’s Mortgage Guarantee Scheme, will continue to support transaction levels in the months ahead, and potentially in the medium term. Everything has changed due to the pandemic and that change will play out over several years.
There may be a minor correction in price growth later this year, but the lack of supply and cheap money mean house prices are unlikely to fall materially any time soon.
In the past couple of weeks, the lack of stock being reported from estate agents, together with buyers now waiting until the end of stamp duty and sidelined by the prospect of a summer holiday, has caused the market to pause for breath. But this may be only a brief pause.
Summer sizzlers
Lenders seem to be starting their Summer Sizzler season a little earlier than usual with a plethora of rate cuts as the battle to retain that competitive edge and market share signals the possible return of ‘Mortgage Rate Wars’.
While many people will continue to look for more outside space and the double sink gives way to the double home office, the battleground for lenders may well be in the remortgage and first-time buyer space.
The usual cursory glance at the money markets show that three-month Libor is stuck firm at 0.08%, with cousin three-month Sonia also stable at 0.05%.
Swap rates have hardly moved, with longer-term rates falling a smidge. Since the last column, therefore:
- 2-year money is unchanged at 0.32%
- 3-year money is down 0.02% at 0.46%
- 5-year money is down 0.03% at 0.70%
- 10-year money is down 0.03% at 1.04%
In the mortgage market it’s still all go with so many rate and criteria changes to keep up to date with.
It was good to see a report from indie-darling Aldermore that showed that first-time buyers using a broker in the past year had leapt from 19% to 48% in March. And 98% of those surveyed said using a broker was helpful, which shows how much great work you have all been doing in getting the broker message out there and doing a great job for your clients.
Rates-wise, we have seen the return of the sub-1% rate with first TSB then Nationwide introducing its reduced two-year fixed rates at 0.99%. In a growing and welcome trend where green mortgages are concerned, Nationwide has also launched its lowest further-advance rate: 0.75% for green additional borrowing. Expect much more on the green theme in the months ahead.
NatWest has released new Mortgage Guarantee Scheme products at 95% loan-to-value through brokers from 3.65%, and is raising the maximum LTV for remortgage applications with additional borrowing (excluding unsecured debt consolidation) to 90%. It has also removed its £25,000 income requirement for buy-to-lets.
Clydesdale Bank has increased its maximum loan size from £750,000 to £1m at 85% LTV, with larger loan sizes available in London and the Southeast at 90% LTV. It has raised its maximum term to 35 years.
It was also interesting to see that Newcastle Building Society was the first lender to launch 95% LTV deals under Deposit Unlock, the new mortgage indemnity scheme developed with the Home Builders Federation and its members. Available in the Northeast initially, it will apply to new-build homes up to £300,000.
Finally, it was great to see an important judgment in an interest-only misselling claim being dismissed in court. Many spurious claims have come from a similar source over the past couple of years and it seems these fishing trips may finally be called out for what they are.
WHAT REALLY GRINDS MY GEARS?
An age-old discussion takes place between brokers and lenders on service standards, packaging and communication generally.
It comes to the fore at times like this when everyone is busy. Throw in a stamp duty holiday deadline and things are bound to get fraught. So this is a plea to both sides to listen and communicate.
Brokers do not chase because they have nothing else to do but because there is a client at the end of it stressing about losing a property. We must remember it’s the client who matters.
Likewise, brokers, we need to help lenders by improving the standards of our packaging; making sure we have asked all the pertinent questions and communicated this to the lender, while managing the client’s expectations in terms of timescale.
It doesn’t help by taking out one’s frustration on the BDMs. They’re precious, in the firing line and shouldn’t be treated like a boxing bag. Likewise, it doesn’t help when lenders don’t support their BDMs or listen to constructive feedback.
We are lucky to have some exceptional brokers and amazing lenders. By working together we achieve great things.
Hero to Zero
The Blood Bank initiative – a great idea from great industry people
Lenders cutting rates and improving criteria
FCA’s ban on ‘price walking’ in the general insurance market
Reports of good borrowers being denied 90% and 95% LTV loans through tough credit scores
FCA’s new fees levied on principal firms for ARs
The spectre of a third wave – please be careful out there
