Over the past month or so, and certainly since the Bank of England’s decision to increase Bank Base Rate (BBR) to 0.5 per cent, there has appeared to be a feeling that 2022 will be the year of the slow rate rise.
Even if product pricing – apart from BBR trackers and standard variable rates (SVRs) – might not wholly be influenced by movements in BBR, there can be an underlying belief that the market is only moving in one direction.
And yet, as advisers, I’m sure you’re constantly telling clients that this isn’t necessarily the case at all. For instance, while I was writing this, the news came through that HSBC were back to offering below one per cent deals for 60 per cent loan to value (LTV) borrowers wanting two-year fixes. It had also cut a number of other rates.
Now, of course, we are a few months on from there being a number of five-year fixed-rate deals below one per cent available, but this move is likely to be followed by others, plus we still have access to highly competitive five-year options.
Indeed, this is a market currently defined by its competitive nature, and one wonders if, after a few quieter weeks at the start of January, this isn’t a lender signalling the start of a serious intent to write some business.
After all, it’s not as if we don’t already a wide range of products priced keenly. For example, further up the LTV curve, rates have actually been falling as lenders look to secure business volumes in areas of the market where there might be more demand. Hence, we’ve seen two and five-year rates dip at higher LTVs.
Base rate news causing action
The point is that we have something of a unique opportunity here in that base rate movement tends to focus the minds, particularly of existing borrowers who might want to remortgage and who might think rates will only rise from here, plus the reality of the situation is that rates are still available at, what can still be described, as historically low levels.
That leaves a lot of scope to help, especially when it comes to existing borrowers in a year which many people are saying will be heavily defined by its remortgage activity.
I read recently that ‘capital raising’ was the top search term for advisers on Knowledge Bank during December, which signals to me that existing homeowners are aware of the opportunity they have. After two years of house price rises, and with rates still low, they are likely to view now as the time to access their increased equity to perhaps carry out the home renovations they want to, or to pay off costlier debt, or to help family members, or perhaps to start investing themselves.
The reasons for capital raising will be many, but I suspect large numbers of borrowers – especially in light of the pandemic – will be looking at how they rework their existing homes into environments where they can both live and work from home. Because the fact of the matter is that many people’s home spaces, as they currently exist, have literally not been up to the job of working from there.
That fact, and a more flexible working environment and situation offered by many employers, is likely to mean that capital raising via remortgaging becomes increasingly popular for this purpose.
All in all, we have a very strong mortgage market to offer clients. And, even if the Bank of England feels it needs to act again on rates to counter inflation, one can see the ultra-competitiveness amongst lenders meaning this will not change.
Jo Carrasco, is Business Partnerships Director at Stonebridge