Last month, I wrote just prior to the new – and now previous – Chancellor’s ‘fiscal event’, with I’m sure no one quite appreciating quite what a huge impact this would have on the mortgage market.
Back then, the focus was on the cuts to stamp duty that were eventually announced and have, of course, been sidelined as a result of the speed of change that enveloped our sector, particularly in terms of product numbers, interest rates, and product pricing, stress tests, and affordability.
Understandably, the focus on rates has been all-consuming, not helped by ‘viral’ clips such as the one of a potential first-time buyer on BBC’s Question Time who suggested her mortgage offer had increased from 4.5 per cent to 10.5 per cent as a result of the government’s action.
Unfortunately, there was no adviser on the programme to balance the story, but there have been plenty of advisers all over the media in recent weeks, presenting a truly united front and offering tangible support and level-headed advice to those existing or would-be borrowers who might feel they are losing their mortgage minds at present.
Charles Roe from UK Finance has also been doing a first-class job of educating the media about the positives in terms of there still being an extensive range of products available and, indeed, that lenders do want to lend.
Rates already on an upward course
It’s been obvious to us all for some time that rates were going up – we’ve seen that in terms of both swap rates and Bank Base Rate, as the Monetary Policy Committee try to control inflation, but we didn’t imagine that rates would rise so significantly in such a short space of time.
Neither would we have anticipated the markets’ reactions, the price of gilts and the consequences for swap rates which determine a lender’s fixed rate pricing.
Much has been said about stress testing but we need to calm down the media by reminding them the approach to rate stressing has existed for over a decade, such that consumers have been stress-tested for affordability at rates far in excess of their pay rate.
Deal ending worries
A real issue here is the product pricing for those hundreds of thousands of borrowers who are coming off their existing deals each month and are looking for alternatives. Many existing borrowers are some months away from the end of deals but want certainty before any further increase in rates – such that they elect to suffer an early repayment charge (ERC).
And here, of course, is where advisers have come into their own and will continue to do so.
In that sense, reassuring and educating existing borrowers, or those wanting to get on their ladder, is perhaps the best job that can be done right now. Some borrowers will regret a knee-jerk reaction that could end up with them paying far more than they need to.
At the recent Stonebridge Growth Forum, a member of the Forum shared an example of a client who had paid their ERC of their own volition and urgently needed a new mortgage deal. They incurred the ERC before they had even spoken to the adviser, and it is entirely possible that this borrower will be suffering costs and charges which an adviser could have reduced.
A sense of calm
Clearly, in times of stress or worry, consumers can panic and press the wrong button at the wrong time. Advisers have a huge opportunity here to ensure this doesn’t happen and to put people on the right path, using experience and expertise.
Even a few weeks after the ‘fiscal event’, with product ranges returning, naturally at higher rates, there are whispers of further government intervention in the market, and swap rates have come off their most recent highs.
All this market change will evolve and impact on the mortgage market and may provide far better options for borrowers in the future than the status quo in the first week of October. Advisers are certainly very well-placed to lead the way on this, and it is in these periods of consumer uncertainty and a certain degree of turmoil, that the advice profession comes into its own.
We have to make the most of that!
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