For nearly 18 months, the cost of living headlines have tended to be dominated by energy and utility bills, plus of course the cost of food and clothing, as inflation was maintained at double-digit levels.
Now, there is a considerable focus on mortgage payments, with the most recent inflation figures – and their overall level of stickiness – pushing swap rates higher in anticipation of the MPC having to act more frequently as the year progresses.
These, you might say, are two sides of the same coin, however what makes this much more tangible – particularly for existing borrowers – is the likely disconnect they will see in terms of their existing mortgage, particularly if arranged two/three/five years ago, and what they are likely to encounter throughout the rest of 2023 and into 2024.
It is particularly instructive that opposition politicians are already forcing this issue into the national political discourse and conversation, with suggestions the government may need to intervene in the mortgage market, as it did during the pandemic with furlough and as it did with energy bills.
Whether this Conservative government is willing to go down that particular road however remains to be seen and is probably akin to an existential question for the Tory Party.
For a party that traditional focuses on the responsibility of the individual, rather than ‘State handouts’, it has already been one of the most interventionist right-wing Governments – a situation that most of its membership might have baulked at, certainly prior to the pandemic.
Now, however, an interventionist narrative has been set, which may leave homeowners believing that, if the government was willing to do this on energy, why not on mortgages?
For what it’s worth, I think this will feel like a bridge too far, even if high interest rates/higher mortgage payments in the lead up to a General Election, is unlikely to do their chances of winning another term any favours whatsoever.
If you support homeowners with their mortgage payments, perhaps through the resurrection of the MIRAS scheme, then wouldn’t private tenants – who are also seeing higher housing costs via rent increases and a general lack of supply – be justified in wondering why they are not being helped as well?
This, we should remember, is a government which has been supportive of prospective first-timers in trying to help them on their ladder, with the biggest barrier here being the ability to save for a deposit, which is made doubly difficult by the increased cost of renting.
In a sense, the government is likely to be getting it from both sides – homeowner and tenant, not forgetting the landlords who are also trying to secure ongoing finance at rates which mean they can keep invested and don’t have to sell their properties, which would mean an even sharper supply imbalance.
We know the housing market is fully connected, but this current situation shows just how much, and it does throw into question whether the government/Bank of England left it too late in terms of trying to get inflation down more quickly, because it’s clear that high inflation – plus of course the disastrous ‘Mini Budget’ – has resulted in interest rates being pushed ever higher.
Going back to existing borrowers, the increase in mortgage payments they will see as a result of this new environment, will of course depend on all manner of circumstances. Hopefully, they will have been able to pay a significant chunk of their mortgage off over the last term, perhaps they have been able to drop down a level in terms of LTV due to this and house values rising over that period, and perhaps their adviser will be able to secure them a better rate than anticipated.
However, the likelihood is their payments will be going up, unless they extend the term or move to interest-only for a short period. And, the outlook does seem like rates still have further to go – it is seeming ever more likely that Bank Base Rate will be up at the 5.5/6% level in the not too distant future, with perhaps even further to run.
Product rates will be disconnected a little from this, and will be predicated on other factors notably swaps, but it will not be surprising for advisers to be pushing a message which suggests ‘secure a deal today, rather than wait for falls which seem even more unlikely’, at least in the short term.
Given this, the ability to remortgage quickly and efficiently is vital, and clearly advisers can offer their clients a much better chance of doing this by eschewing free legals and providing quality conveyancing advice which represents them, not just the lender, and is likely to be completed within the desired timescale rather than going into the ‘free legal’ bucket.
When there is a level of uncertainty, and indeed fear, about what rates are available, then when you do get a product that works for your existing borrower client, they (and you) are going to want to deliver as much certainty as possible, as quickly as possible. Covering off all their needs, including conveyancing, will give you a much better chance of delivering on this.
Mark Snape is CEO of Broker Conveyancing