News that almost 10% of all mortgage products were taken off the market in the last week of May was always going to hit the headlines, especially given the speed of those withdrawals.
However, we are already seeing lenders returning to market with new product ranges and, while it may take a little time to get back to those pre-inflation volumes of product choice, I’m confident this will be achieved in the weeks ahead.
What is also clear – at least at the time of writing – is that swap rates have settled a little after their recent volatility. However, lenders have typically repriced upwards, and they’ll be forgiven if they continue to adopt a ‘wait and see’ attitude in the coming weeks before looking to reflect rate reductions.
Of course, the entire mortgage market has needed to react to market changes, and if we didn’t already have affordability in a higher rate environment firmly front and centre when dealing with clients, we certainly do now.
It appears to be further evidence to support the argument that rates are in the process of finding their ‘new normal’ and it is an entirely different scenario to those seen by borrowers during the last decade or so.
There are of course positives for our industry here, not least an increasing need for advice in a market that is subject to constant, and occasionally wild fluctuation, but also over the medium-term with the level of competition that still exists in the mortgage market.
We are close to the half-way point of the year, and no doubt lenders will be looking at their six-month figures and (I suspect) wondering how they can achieve a stronger H2 than H1.
What are the options at their disposal if they want to attract the lending volumes they seek? Lenders can obviously move price and they can introduce more flexible criteria. The former often the easier tactic to deploy.
It might not seem like it now, but we’ve already seen something of a disconnect between, for example, Base Rate and product rates in the early part of the year, with the latter often being lower. Given the need for new business, there’s nothing to suggest this won’t continue into the rest of the year.
For advisers, it’s now about making the most of the opportunities this type of market presents, not least in terms of easing the worries of those who are heading into quite a different rate environment than the last one they would have encountered.
Given this, it is likely that product transfer (PT) options will figure heavily for existing borrowers who might feel they have few other options than those being offered by their existing lender. However, as mentioned, the wider mortgage market is likely to remain a competitive space by the sheer number of lenders all fishing in the same waters, and therefore a PT is certainly not the only ‘catch’.
Industry figures, and our own, evidence how PTs have risen in the course of the last couple of years, and while we anticipated – and forecast –this, there are a number of considerations to be made, not least in terms of the smaller procuration fee that accompanies almost all PT completions, but also the fact PT activity tends to reduce the average loan size, and advisers report there tends to be less ancillary sale opportunities with PT clients.
Obviously, advisers are often carrying out the same amount of work, and the advice risk, whether it’s a PT or remortgage, and we should all continue to lobby lenders to pay the same proc fee for PT as they do for remortgage, however belligerent some lenders appear on this topic.
For many clients the PT will be the most suitable option, but not all, and in a marketplace which is changing day by day, even hour by hour, I suspect many deals which remortgage the client to another lender will continue to offer value, not just to the client. Let’s make the most of that.
Rob Clifford is chief executive of Stonebridge