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Consumers asking ‘how soon is now’ when it comes to rates and making their move

Advisers can obviously only work in a ‘moment in time’ and, as we’ve seen over many periods, the shifting and reshaping of the mortgage market can have a significant impact on activity, demand, and the recommendation and advice brokers can offer.

While trying to be as proactive as possible – particularly when it comes to customers reaching the end of deals – there is always an element of reactivity when it comes to the market they will be facing at any given time.

Since the start of the year, the market has been incredibly fast-paced and changeable. Recent data from Moneyfacts for the average shelf-life of a mortgage product shows that in spades, falling to just 15 days as lenders increased their fixed rate pricing, however at the beginning of February that product shelf life was back up to 28 days.

Managing the duplicate application trend

In December and early January, the market coped with frenetic activity from lenders, with products being pulled seemingly on a daily basis, this time with a raft of price cutting.

That clearly impacts individual advisers and firms who must deal with a constantly shifting landscape, which often requires them to deal with revisions to their advice and, consequently, multiple applications per client, with only one completion and proc fee to come out of all that duplicate work by the adviser.

The more positive news on that front is, certainly from our figures, that such ‘duplicate’ applications are now tracking much more like their long-term average – approximately 15% – than what the market experienced earlier in the year when, at their peak, were believed to be as high as 28-30%.

The extra work landing with advisers was considerable, and while I have plenty of sympathy for lenders who were trying not to be left on a limb in terms of their funding and hedging costs and were having to work quickly in order to mitigate those risks, it clearly presented some serious issues for other stakeholders, notably advisers, who have a (consumer) duty to deliver positive outcomes and therefore strive to present the most appropriate mortgage recommendation for every client.

When product availability shifts so regularly, advisers have to find time to react quickly which frequently leads to multiple applications and many hours of extra work, usually with no additional income.

And, while we might all acknowledge that recent weeks have seen a reduction in terms of that pace of change and March/April’s product shelf-life might look somewhat different from what we were seeing in the early part of the year, advisory firms should perhaps prepare themselves and their customers for a return of volatility in the months ahead.

Of course, much will depend on inflation continuing to track downwards and influencing both Bank Base Rate decisions and swap rate movements, but if – as anticipated – we do get a rate cut decision from the MPC, and between now, then, and the immediate aftermath, we do see swap rates also moving quite sharply in anticipation and then reaction, then I think we could see a repeat of late 2023/early 2024 product changes.

As I write this article, in mid-April, SONIA swaps are all pretty much down on where they were last month, no doubt in anticipation of rate cuts in the months ahead. A May cut still seems like a bridge too far, but action in June does appear much more likely.

The Bank of England recently suggested lender appetite would improve in the months ahead, and if the pace of volumes and activity has slowed in the early part of spring, then you would expect lenders to leverage lower base rates later in the year, particularly – as it has already shown – vibrant competition between lenders tends to deliver pricing advantages for consumers, given that lenders seek to win market share.

We should not underestimate what a potentially powerful ‘moment’ we will have on our hands when the MPC does eventually make that decision to cut BBR. It will reinforce the belief that rates have peaked and are likely to be heading down further over the months and years ahead.

Strategic resource planning for market shifts

Consumer confidence should improve, consumer behaviour might also shift, and advisers need to be prepared for what that should hopefully deliver to them in terms of new enquiries, and an increased consumer demand. Particularly after a period when I believe many consumers have chosen to sit on their hands, feeling that ‘now’ isn’t the optimum time to choose the best mortgage deal.

The next big question for those consumers will be, how soon is now? I suspect we’ll have that answer by the June MPC meeting – leading up to that, and in the immediate aftermath, it would not be surprising to see a ramping up of lender activity, product changes, and mortgage products becoming even more attractive.

From a resource point of view, preparing for such a shift should certainly be a significant consideration for advisers and firms. Putting in the right plans now might well offset any future headaches a further period of market volatility might bring.

Rob Clifford is Chief Executive of Stonebridge

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