January certainly began at breakneck speed for mortgage broking, and the near-constant shifting of product pricing by the vast majority of lenders – often multiple times in a very short period of time – will have certainly tested advisers and their ability to keep clients on the most competitive deals.
This barrage of price changes was undoubtedly good news for consumer choice and outcomes but, for advisory firms, it presents a challenge and perhaps sets us all a question around how brokers cope with such a market, the consequent activity, how advisers are able to deliver to clients during such a period, the work required, and how to ensure advisers are suitably recompensed for that.
Market outlook: stability and potential storm
Clearly, the last couple of weeks in January were nothing like the first few, and there has been a more stable period recently, albeit with some rates rising.
You might therefore wonder whether this is the calm before another ‘storm’? Will a further flurry of ongoing rate and product changes likely define early February as it did at the start of January?
Much will depend on the next decision to come out of the Bank of England MPC meeting. As I write this, we are just a few days away from this decision, and while we’ve clearly seen inflation fall and then rise slightly in the two months since the last meeting, there doesn’t appear to be any serious expectation that the Committee will change BBR this time out.
Capital Economics issued a recent briefing which said it doesn’t expect any of the Bank of England, the Federal Reserve or the European Central Bank to cut rates at their first meetings of the year, ‘but they may drop hints about when monetary easing could start’.
And, of course, as we know all too well in our sector, BBR tends not to be the primary factor when it comes to mortgage product pricing, with much more importance and emphasis placed upon swap rates.
What is of interest is that SONIA rates have all been inching up in recent days and compared to a month ago, for example, they are all above the levels we saw at the end of 2023/start of 2024, which largely resulted in the rate-cutting we witnessed in early January.
In that sense, we may see lenders waiting this out in the short-term, however, that too might bring some additional pressure for advisers in terms of securing rates that may not be around for much longer.
Then again, the MPC could throw a curve ball, reduce BBR, such that swaps might follow, and the advisory community would consequently be back into a period where it’s trying to secure better rates for those it has already advised.
This clearly presents a significant challenge. To highlight one feature of what has been happening, Stonebridge’s ‘application resubmissions’ are currently running between 25-30% of monthly applications. Historically, this tends to be 10-15%, which as highlighted previously, is doubtless beneficial for consumers, and advisers will of course want to ensure the best consumer outcomes.
Client behaviour and adviser challenges
However, it suggests that between 30-50% of all clients are altering their product or lender selection after the initial advice/recommendation has been provided, and often very late in the transaction.
As you know, that clearly has significant repercussions for adviser workloads, and if the sector is to have much more frequent periods of shifts/changes/updates in a product and price sense, then firms will look at the amount of work involved, the time it is taking, the resources required, and potentially make a judgement call about how they are paid, and for example, whether the single procuration fee at completion, is enough to recompense the extra requirements and work.
Overall, a vibrant mortgage market is clearly a positive phenomenon, especially when we have seen rates falling from the highs of 2023 and where this is rightly generating greater interest and demand. Advisory firms are however not charities, and they need to ensure the income they receive reflects the extra work required of them by consumers and lenders.
Rob Clifford is Chief Executive of Stonebridge