“I don’t know about you, but I’m 22.”
Yes, a big hello to 2022 and to all of you from Taylor and I.
May I be the first to wish you a very happy new year. What? Is it February already? Either way, welcome to a bright new year and I hope you all had a good break, however distant it may be now.
This piece represents my 10th anniversary of writing this column as my first Market Watch article was January 9, 2012. I never thought I would be sitting in my cupboard office under the stairs Harry Potter style, with my lit scented relaxation candle. and my late-night Spotify playlist wooing me, while writing my 323rd column. I am so honored to be here.
Some lenders have a handful of exciting new products, such as the Suffolk Building Society’s expat vacation rental offer
Re-reading that very first column, it’s amazing to think how much that has changed, but also how much the work we do and the industry we work in remains the same.
This year is shaping up to be a very interesting one, and it looks like the market is off to a strong start as workers are starting to return to the office, students are returning, and some people who have left the big cities are already looking to come back. The term “pied-à-terre” risks finding a familiar resonance.
With the specter of inflation still looming large – there is talk of it now hitting 6% – the likelihood of further rate hikes is getting stronger. Reading these lines, we could have already witnessed an increase in the Bank of England (BoE) key rate from 0.25% to 0.5%, with every chance of reaching 1% by the end of the year.
Double edged sword
The difficulty is that the BoE is treading on the hilt of a particularly sharp double-edged sword as it attempts to balance the economy and a cost of living crisis with the ills of inflation.
Competitive pressure between lenders remains high, so hopefully the price changes won’t be too dramatic
At first, this won’t have much of an effect on many mortgage borrowers, who have long run to the sanctuary of fixed rates. But it will hurt potential future borrowers and is another slap in the face for those already facing higher energy and food costs, as well as a misguided government refusal to withhold a National Insurance hike.
The problem is that another small increase, or even a couple, is unlikely to temper inflationary pressures without a major change. And, while rates need to return to some semblance of normality sooner rather than later, the public isn’t ready for that any time soon.
In fact, a Bloomberg Economics report suggested that, to return to its 2% inflation target, the BoE should deliver a Volcker shock (named after former US Federal Reserve Chairman Paul Volcker) – a rate huge interest rate hike that could put up to 1.2 million people out of work and push the economy “from record inflation to deflation” next year.
The BoE marches from the guard on the blade of a particularly sharp double-edged sword
Alarmist, perhaps, but it shows the seemingly insurmountable work of the Bank, and one that will get worse before it gets better due to the nature of this cost inflation. Don’t worry, though. Boris is having a cheese and wine party at number 10 to discuss the options and I’m sure he’ll sort it out.
The good news is that competitive pressure between lenders remains high, so hopefully the price changes won’t be too dramatic. But much depends on the reaction of the money markets.
Speaking of which, and in almost seamless sequence, the money markets themselves make for interesting reading. The three-month Libor has yet to change its Christmas party weight and has ballooned to 0.64% while three-month Sonia commands another sherry at 0.53%.
Exchange rates are chipping away at vegan snacks, as longer-term money looks cheaper than short-term.
From the last column, (and quite similar to what they were 10 years ago):
2-year silver is up 0.22% to 1.29%
3-year silver is up 0.15% to 1.35%
5-year silver is up 0.09% to 1.30%
10-year silver is up 0.08% to 1.20%
Meanwhile, the latest National House Price Index shows that in January prices rose 11.2% year-on-year. Although the housing market destroyed it last month, the rest of the year will likely see a slowdown in the rate of price growth due to inflation and rising interest rates.
However, values are unlikely to fall as mortgage rates remain exceptionally low, people avoid renting and the ‘space race’ continues. As always, prices are supported by a chronic lack of supply.
Companies that behave badly will always behave badly while good ones will always be good but will find it even harder to do so
It’s not just the buy market that’s in demand. Data from Arla Propertymark has revealed that the availability of rental stock in London has fallen by 71% in 12 months, with a shortage of good quality rentals in many places across the country.
The mortgage market itself, however, appears to be doing well, with lenders mostly well positioned and willing to lend. It will be interesting to see if they continue to improve the criteria as Covid moves from pandemic to endemic, and if we finally see the stress test hurdle reduced.
Some lenders have a handful of exciting new products, such as the Suffolk Building Society’s expatriate vacation rental offer of up to 80% loan-to-value. The expat market is always busy and there is room for more lenders.
Cherished lending specialist Kent Reliance has launched an improved range of buy-to-let rates of up to 85% LTV
Meanwhile, darling lending specialist Kent Reliance has launched an improved range of buy-to-let rates of up to 85% LTV, some with no maximum loan size.
Elsewhere, there is the usual proliferation of rate hikes and cuts that depend on lenders managing service levels and reacting to changes in market prices.
TCF on steroids
In the regulatory world, where 10 years ago we were talking about the mortgage market review going well, this year’s angst is directed at the new consumer duty. The goal is to set a higher expectation for the level of care companies give to consumers, which is, of course, a great goal.
This year is going to be very interesting
The initial response from many brokers is, “We do it anyway”, but watch carefully and this could be considered fair treatment of customers on steroids! For some companies, this will require a significant shift in culture and behavior, a ton of extra paperwork, cost, and little time to do it.
Meanwhile, companies that behave badly will always behave badly while good ones will always be good but will find it even harder to do so.
Speaking of culture, with staff at the Financial Conduct Authority themselves about to go on strike, there seems to be a need to look inward before putting in even more regulatory costs for a functioning mortgage market well, with good results for customers. , day after day.
So this is it. May this year be great for all of us.
2022 – full of bright hope and the prospect of success for all in this beautiful industry
Ami’s ongoing work on diversityequity and inclusiveness – it’s so important
Danske Bank entering the UK market with its carbon neutral mortgage for residences
It’s a shame to see Masthaven Bank withdraws from the UK banking market and we wish good luck to all
fast climbing building insurance premiums on high and mid-rise buildings caused by the siding scandal
Boris – surely there is little authority left now?
You know what really squeaks my gears?
It’s interesting to reflect on the past 10 years and the huge amount of change we’ve seen over that time. Although we face the same old battles with some opponents, I really think we’ve improved a lot as an industry.
Getting out of the credit crunch was the main goal for many and since then our relationship with lenders has improved dramatically, with communication between manufacturer and distributor at an all time high.
Likewise, ten years ago, we might not have dared to take an industry-wide look at the topic of diversity and inclusiveness, or speak openly about some uncomfortable truths in our industry; nor have they been so open about the state of mental health. We have a long way to go, but we have to recognize the positives.
But some things remain the same. Like the transfer process. Like the fact that technology has yet to truly enrich the home buying journey from start to finish, although it is getting closer. Like our familiar dance with regulators who don’t seem to believe our industry is working well; and endless discussions about rising regulatory fees and costs.
We are getting there, but there is always more to do and we must not stop until our industry is recognized by all as the shining light that we know it can be.