These might feel like unprecedented times with an array of ongoing changes and developments affecting the mortgage market, shifting the narrative and the advice and recommendations advisers can provide.
Even for those of us who have been around for longer than we would care to admit, there is a new environment and emerging landscape, so for those advisers who are relatively new to the industry, they might well be dealing with circumstances and events which they have never experienced before.
And let’s be honest here, there is a lot to contend with at the moment, from wider macro-economic shifts to Bank of England, regulatory and political policy, to broader geo-political concerns – with this feeding into our market resulting in changes which impact you and your clients on a daily basis.
The first, and perhaps most obvious, of these is around Bank Base and swap rates, their recent history and pricing trends, where they are now, and where potentially they are heading.
Multiple BBR increases over a short space of time have not been a feature of our market since before the Credit Crunch, so any adviser who joined the sector in the last 14 years will not have experienced this type of market turbulence before.
For the last 13 years we have had an incredibly benign interest rate environment, and therefore both advisers and their borrower clients might be significantly concerned by these increases and by the product repricing we have also seen in 2022, especially when you combine it with inflation and the cost of living.
Which brings us to inflation. As I write, figures just released show it edging up to 9.1% in the 12 months to May, from 9% in April. The ONS figures show this is the fastest rate for 40 years fuelled increasingly by rises in the price of food, but also as we know, utility costs and the price of fuel.
Again, this is something new for the vast majority of people working in our sector to get their heads around, and of course, it will precipitate activity amongst both existing and new borrowers, as they increasingly seek mortgage payment certainty for a longer period, especially at a time when their other major outgoings are rising.
You might also be dealing with existing clients examining their monthly outgoings and wondering which costs they are able to jettison. Be particularly aware of this around protection premiums, given these are non-mandatory; from what we are hearing this is not a major issue, but some clients might think protection isn’t critical at this time, when this may, in fact, be the most important time to have cover.
“We have not yet seen an increase in protection policies being cancelled,” he said. “This I believe is due to the time our advisers invest with clients to fully understand their needs and assess potential financial shortfalls for the customer and their families. Should the situation arise, our focus is to reconfirm with the client the benefits of the protection that has been arranged, reassessing the risks and that a prolonged period of sickness, critical illness or even death would have on their ability to maintain the repayments on the mortgage debt and other commitments.”
And again, from an advice perspective, there are other pressure points which might not have been so prominent prior to this. Of course, we have all dealt with a very busy environment, and the post-pandemic mortgage market, fuelled by the stamp duty holiday, placed significant pressure on all stakeholders in order to get business completed.
That pressure seems not to have dissipated though, and it will not need me to tell you that a combination of factors could make this a difficult market in which to get cases through. Lender service levels, resource shortages, and the need to react to what is happening to rates and the competition, is producing what appears to be a level of product/rate/criteria changes that some advisers simply won’t be used to.
And this could get worse before it gets better. Resource pressures are a significant problem for many property-related businesses, not just lenders, and I’m aware that service delivery is poor at times, as a result of irregular business volumes, due to both funding costs and, as mentioned, the constant need to monitor and react to competitor activity.
This is certainly a time for mortgage advisers to weigh up all of that in client recommendations, and if it is service considerations that dominate the borrower’s priorities, then advisers need to keep clients well informed, particularly those who need to complete within a specific timeframe. Far better to get a deal through, than not, especially given the likelihood of a less attractive product rate, the longer the process goes on.
Overall, therefore, while we’ve seen a combination of all those issues influencing our market at various times, this current environment is unique. It is creating significant business opportunities, but it also presents challenges for advisers and their clients, given the rapid pace of change. Keeping on top of all of this will however ultimately prove an adviser’s worth and reiterate the power of experienced, intermediary advice to consumers.
Rob Clifford is Chief Executive of Stonebridge