The Bank Base Rate (BBR) rollercoaster appears to have been steadily cranked up in recent weeks with the Bank of England Governor, Mark Carney, being the latest MPC member to give their opinion on when rates might rise. There appears to be a concerted campaign from MPC members to try and prepare the UK public for a rise before the end of the year; this despite the fact that not one member voted for a rate increase in June, and one might expect the results of the July meeting to show the same unanimous vote.
Of course in a very true sense we are all waiting for that first rise because, while no-one expects rates to suddenly rocket in the subsequent moves, the signal will be loud and clear that rates are going back up, although perhaps not to historically ‘normal’ levels. For instance, I suspect it will be some time before BBR reaches 1.5% let alone 3%.
What this move will produce is a renewed interest in remortgaging levels, that’s if borrowers are able to meet the new, stricter affordability measures. Most commentators suggest remortgaging activity will receive a considerable boost from a rate rise – and I’m inclined to agree – but the kick-start might be rather less than in years gone by. After all, we are likely to be seeing borrowers who have not remortgaged in the past five to six years coming to market and confronting a rather different lending landscape.
There’s no doubting that purchase business remains the dominant force – our own recent instruction statistics for quarter two this year revealed a two-third/one-third purchase/remortgage split, and this has been pretty constant certainly over the last year or so. A rate rise is likely to see borrowers at the very least exploring their remortgage options however we shall have to wait to see if it can produce a greater parity between the two types of transactions.
Advisers will undoubtedly benefit from any rate rise in the sense that clients who have not felt the need to secure advice in a 0.5% environment are likely to be wanting advice on reviewing their options. However, to my mind, advisers need to be making these clients aware of the remortgage possibility now rather than waiting until the MPC makes its first upwards decision. Undoubtedly, the best time to remortgage will be prior to a BBR rise and, given the signals coming out of Threadneedle Street appear to be pointing towards the end of the year, one must suspect the rates on offer now are going to be the most competitive for some time.
Indeed, in an all-round sense, now would be the time for potential remortgage clients to grasp the nettle. Products are ultra-competitive with very low rates for those with large amounts of equity and top credit scores, plus you also have very keen protection pricing, with the same to be said for conveyancing, general insurance and legal services. In the great scheme of things, and certainly when we look back at the market of 2015 in 12 months’ time I think it will be safe to say that right now was the best time to secure clients the advice and recommendations they need. One hesitates to say, ‘You will never have it so good’ but all the hints and clues suggest these market conditions will not be around for much longer, and therefore both the adviser and the client needs to make the most of them.
Harpal Singh is managing director of BrokerConveyancing.co.uk