Tell borrowers to stop waiting for mortgage rates to fall

As I was just about to sit down and write this, news filtered through from the Office for National Statistics (ONS) that Consumer Price Index (CPI) inflation had fallen for the third consecutive month.

After posting a 40-year high in October last year of 11.1 per cent, these latest figures reveal that inflation has dipped again from 10.5 per cent in December to 10.1 per cent in January.  

Of course, it still means prices have continued to rise by double-digit amounts but the direction of travel at least does give cause for optimism. Although, I do wonder whether the powers-that-be would have liked to have seen bigger monthly falls recently. 

It also begs the question – of particular pertinence for us in the mortgage market – whether inflation might actually be stickier than some policymakers had anticipated, which again leads you to question what further action might need to be taken in order to bring it down further and faster? 
 

Rate movements 

February’s decision to increase Bank Base Rate (BBR) to four per cent was trumpeted by many as something of a line in the sand. There being an anticipation perhaps that the Monetary Policy Committee (MPC) might now feel it need not increase BBR further, and while there are some members of the MPC who clearly feel this, there have been others warning that rates will need to be increased again. 

Much of this of course is about the limited number of tool(s) at the Bank’s disposal in order to meet its remit. Lest we forget, the Bank has a two per cent inflation target, so to be running at five times this level – and higher over the last year – is not exactly a sign of a policy working in its sweet spot. 

Now, the positive within the mortgage market at least is that rates have continued to dip even with this further BBR increase. However, these sub-four per cent rates are (as you would expect) for those with the biggest deposits/equity levels, and given swaps have inched back up in recent days, then it seems clear that rates are not going to continue on this downward curve. 
 

Give clients confidence 

In a way this provides advisers with a level of certainty to convey to their clients. If they were labouring under the misapprehension that rates are about to drop down to the levels we saw in late 2021, or the rates that have been around for much of the past decade, then now is the time to probably disavow them of this. 

Again, if they are sitting on their hands, waiting for ‘something better to pop up’, again now might be the time to outline this new normal and to suggest they are waiting for a future which is highly unlikely to appear in the short-term.

Maybe at some point in future, when inflation is much lower, the Bank may feel confident to bring BBR down, but that doesn’t seem likely anytime soon. 

In the meantime, there are positives to grasp onto and to share with clients. Recent figures on product numbers are encouraging – according to the latest Moneyfacts research, mortgage products now number over 4,000 (4,341), for the first time since August last year. Pre-mini Budget we might add. 

And although this is somewhere off the 5,356 registered a year ago, again the numbers have continued to rise in recent months as lenders seek to secure the business volumes they are committed to getting in 2023. 

That, in itself, is a further positive.  
 

There for support 

As we know, not only are intermediaries taking a growing share of the market – necessitating further support and resources being put into the intermediary channel – but competition is strong between lenders. As the year progresses, the need to hit those targets and secure the business volume required to do this will grow. 

And, there are other positives, notably recent research coming out of IMLA, with intermediaries increasingly confident about the outlook for the mortgage market and caseloads holding up. 

Overall, it seems increasingly obvious that advisers have plenty going in their favour when it comes to targeting new business and servicing existing clients. The central position they hold has strengthened, and the market dynamic means that borrowers are loathe to make their ‘move’ without seeking advice first.  

We have to make the most of that, the most of the competition amongst lenders, and the most of the uncertainty that many people currently feel, in order to deliver certainty and positive outcomes to our clients.