Many people will be starting to look rather covetously at the beginning of a new year, and an anticipated boost to the mortgage market, particularly from lenders who appear to be keeping some of their powder dry, then it doesn’t seem inappropriate to think about what I would like to see in the new year.
Clearly, I want a consistently strong market. That means positive demand for purchasing and for advisers to win the vast majority of remortgage business that is available.
Recent figures from RICs suggest buyer demand is continuing to fall – and has been trending in this direction for over half a year – and there’s no doubt that the ‘Mini Budget’ put a spanner in the works for many would-be first-time buyers and homemovers.
However, as time has progressed, calm has been restored, swap rates have dropped, and lenders will have or will be setting their 2023 new business targets. I am therefore confident that there will be enough opportunities to grasp and that our sector will see a slightly different pricing environment once January gets underway.
Lenders will want the business, and in a highly competitive marketplace – particularly in prime residential – they are likely to want to make sufficient product pricing adjustments to achieve this.
We are already starting to see this happen – even with the Bank of England MPC inching the Bank Base Rate up again, lenders are beginning to prepare the ground and open up the pipelines for early 2023 applications.
Advisers will have seen some of the biggest mortgage lenders starting to make their plays, particularly in lower-risk LTV bands, cutting rates, and as sure as night follows day, we can expect more to be making announcements up to Christmas and beyond into January.
For advisers, this is clearly a positive, especially when set against the most recent backdrop, with many purchasers potentially sitting on their hands waiting to secure mortgage finance at the cost they are comfortable with, and those coming to the end of their deals, waiting for retrenchment from the eye-watering rates of mid-October.
Lenders (hopefully) jumping over themselves to improve product features and pricing is a real opportunity for ongoing communication between advisers and their client bank, and I hope will provide a business spring in the step.
That said, I’m also of the opinion that the 2023 market is not going to be plain sailing, and expect a tricky six months at the least. Whilst inflation is reported to of already peaked, the ongoing cost of living crisis – particularly driven by energy bills – will continue to weigh heavily on the budgets of the vast majority of UK households.
Clearly, advisers are unlikely to be in a position where they can deliver monthly cost savings to their clients, particularly those who mortgaged two/three/five years ago, but there is still an opportunity to ensure they get the optimum deal, when they do come to remortgage.
According to TML, 52% of homeowners with a fixed, tracker or discount mortgage will need to move to a fresh deal or SVR within the next two years, and while it is positive that many will be offered product transfers from their existing lender, advisers need to ensure their clients are aware of all their options. As mentioned, there should be a fair amount of product choice from right across the market, and clients need to know they can bring the PT offer to their adviser to check it against the available alternatives from the vast number of other lenders.
Finally, on the PT point, what would undoubtedly help the intermediary sector in 2023 and beyond would be more fairness and balance when it comes to procuration fee levels payable by lenders for this valuable business.
Some lenders and they will be known to all, continue to pay the same fee regardless of it being a product transfer for an existing borrower, however more than half do not. This is despite the decent adviser having to carry out broadly the same amount of market research and regulated, compliant advisory work that they would if they were identifying and arranging a full remortgage.
It continues to be an industry ‘eye sore’ to have a two-tier system like this still at play. If 2023 could deliver more lenders seeing the sense in paying the same proc fee regardless, then I would consider this a strong move in support of the provision of professional advice, and undoubtedly one that would be welcome by the entire community. The arguments against doing this seem weaker every year, not least due to the increased cost of regulation facing broker firms.
Rob Clifford is Chief Executive at Stonebridge