Harpal Singh, managing director of Conveyancing Alliance Ltd, looks forward to 2010
Without doubt 2010 will be a year of considerable change, be that in the amount of lending that is (hopefully) done, the levels of consumer confidence, and in all probability the political party which runs this country. Change is definitely coming, to which mortgage intermediaries may well yell, ‘Hallelujah’, because change is certainly needed.
However, we should not expect ‘sunshine, lollipops and rainbows’ in the short-term. The difficult market that we all experienced in 2009 is likely to continue and while there are some positives for us to take forward – slight increases in lenders, a growing number of first-time buyers, more mortgage product choice, etc – we should not forget that there are also negatives to balance out any optimism, not least the end of the stamp duty holiday and the increase in VAT both due to take place on the first day of 2010.
For the short-term, probably at least the first six months of the New Year, we can all expect similarly challenging conditions. However, I would suspect that by the time we’re all celebrating England’s victory in the World Cup in South Africa in July next year we will have seen a considerable improvement in mortgage market conditions.
This is not blind optimism on my part – although the result of the World Cup probably is – because there are already positives hooks to hang our collective hats on as we enter 2010. Mortgage product choice has increased and it now seems like lenders are not as risk-adverse as they were 12 months ago. 90% LTV is not the dirty word it was back then and, while the greater equity/deposit a borrower has the better rate they will achieve, there is a growing market for higher LTV products which will bring rates down.
It has been the purchase market of course which has ‘led the way’ – and I use that term loosely – in 2009. Where once the market was pushed along on a flood of remortgage business, this has now become more of a trickle. However, Conveyancing Alliance has seen a slight increase in remortgage instructions lately and it is my genuine belief that 2010, at least the latter half, will see a much more positive remortgage market for intermediaries to work within.
Up until now many potential remortgage customers have been happy to sit on their lender’s reversion rates. To be honest who can blame them when most are linked to BBR which has been at 0.5% for most of the year and remortgage rates have not looked attractive in comparison. Any increase in BBR and LIBOR will certainly turn the heads of many of those borrowers, who will probably sense that rates can only go one way and will therefore be hoping to remortgage and jump to a new 2/3 or possibly 5-year deals which continues to offer them security against any significant increase in rates.
But what about reversion rates on more recent homeloans? We must not forget those borrowers who took out, for example, two-year deals during 2008. By the middle/end of 2010 these deals will start coming to an end, and while many mortgage customers a year previously were lucky enough to get very attractive reversion rates, these band of borrowers were not so fortunate. Reversion rates of three or four% over BBR are out there and if BBR/LIBOR does rise, these sorts of rates will look particularly unappealing. Many deals will actually be reverting to arbitrary SVRs, for example, most new Abbey deals will revert to SVR which is currently 4.24%. I wonder what it will look like by the end of next year?
It would actually be an interesting exercise for brokers to look at the reversion rates for those clients who have secured their mortgage in the last 18 months this could be a great source of remortgage business for the firm over the next year or so. It has already started but by Q3 2010 we should be seeing much more competitive remortgage rates available, and at higher LTVs as well, given that lenders appetite for this type of business seems to be returning, albeit via a very measured approach.
We should also not rule out a market with a few more lenders adding to the competition, and it should be hoped that these new/re-entrants will view the intermediary distribution channel as the one most likely to bring them the most cost-effective and quality business.
So, in the early part of 2010 the advice would be for mortgage intermediaries to continue to do what they’ve been doing so far to survive, but also try not to pick up any ‘injuries’ in that period. If they can go through the first half of the ‘season’ injury-free then, like England in South Africa, you will hopefully be opening up in the second-half and putting the ball in the back of the net.
Have a prosperous 2010.
