Sometimes you really don’t know where to start; usually when the experience you or others have had defies logic. Like, for example, when someone is so determined to do something that they are ready to destroy an entire economy with it.
When I was studying economics in high school, I was pretty naughty and was in the remedial class – made up of just me and my buddy, Dave. Surprisingly, we both have economics degrees now.
But back then, if I had wanted to test an economic theory that I liked at the time, and I had had the whole of the UK as my testing environment, even bad guys Monty and Dave would have given it a little thought better than the Truss and Kwarteng clowns.
No, you don’t understand, and no, people don’t believe you’re listening
Without caring about the world, or caring about anyone else’s well-being or how markets work, or caring whether it could be paid for, they took to the stage and smugly delivered a series of ideological shifts that sparked a load of explosions — then exit, courtyard side (unfortunately not chased by a bear). I mean – wow!
If anyone had any doubts about the direction of the new government, it showed that ideological politics was back with a vengeance. The wide range of tax incentives and cuts, mostly for high earners and corporations, could be seen as a massive bet that the “trickle down economy” was the big idea that would get the job done. United Kingdom from its current malaise. .
Certainly, first of all, we had the good news of a huge energy capping package, which we badly need. We also secured the repeal of the IR35 rules, the removal of the cap on bankers’ bonuses, the deferral of National Insurance tax increases and the 1 pence reduction in income tax, as well as a change stamp duty to try to further help first-time buyers.
To all of you brokers who have never experienced a market like this: keep calm. Don’t worry about the things we can’t control
Fortunately, the latter was a permanent change, rather than an unwanted vacation period. But, as always, while this will help many first-time buyers, we need to be careful that, as usually happens, house prices don’t just go up more to absorb potential savings and make homes run out of business. reach for many others, especially in times of rising interest rates.
Then came the 45% tax cut; perhaps not a big deal in itself financially, but the straw that broke the camel’s back, both morally and financially.
As all of this had to be paid for by borrowing money, rather than windfall taxes or other tax hikes, investors in the UK suddenly saw a disconnect between the Bank of England’s policies aimed at curbing inflation and government policies that could exacerbate inflation.
This disconnect, plus the “How do I pay for this?” question, combined with the other factors to scare off investors, leading to the collapse of government bonds (gilts) and the rise in interest rates on them to breathtaking levels, as well as the fall of the value of the pound.
It’s fantastic that there have been so many voices in the media, representing the mortgage market
With swap rates soaring and lenders unable to price and withdraw products, all of this eventually led the Bank of England to take action to protect pension funds and the economy as a whole. Yes, it was so hairy.
It was truly Big Bang politics, and while the rewards of success may be plentiful, the cost of failure will be catastrophic for conservatives, as well as for the country.
Finally feeling they had nowhere to turn but a U-turn, the 45% tax cut was scrapped and the Conservative Party conference descended into infighting and court politics. school. Sir Keir had nothing to do but stare in amazement.
Kwarteng, in his conference speech, mentioned that the “mini-budget” caused “a bit of turbulence”, trying to laugh it all off. To call the market reaction “a bit turbulent” is to say that the eruption of Vesuvius was a small bonfire. He is naïve, rude at best, and shows a belligerent and indifferent attitude towards the thousands of people watching the barrel of much higher mortgage payments.
Most lenders are already returning to the market, but at much higher rates
No, you don’t understand, and no, people don’t believe you’re listening. It was a totally avoidable situation.
As a broker in the field, we’ve had one of the toughest weeks ever, trying to deal with worried clients, those panicking that their application or offer won’t be honored, or those at beginning of their journey, hastily making naps; to those who are nearing the end of their product and panicking that their payments will increase by hundreds of pounds per month.
Many lenders announced rate hikes of around 1.5% on products, meaning brokers were at work on a Sunday afternoon and late into many evenings, trying to secure these products for clients before that they do not disappear.
In money markets, the three-month Sonia climbed 0.81% to 3.33%, and swap rates have calmed down a bit from their recent stratospheric journey.
From the previous column:
2-year silver is up 1.46% to 5.28%
3-year silver is up 1.59% to 5.25%
5-year silver is up 1.63% to 4.97%
10-year silver is up 1.45% to 4.41%
The Bank of England now has a delicate balancing act to make sure it doesn’t go overboard but gives people time to rebalance their budgets and expectations.
As always, many reports and social media posts have been alarmist. Brokers strive to keep everyone calm and explore all options, allay concerns and work with lenders to understand their issues.
But it’s fantastic that there have been so many voices all over the media, representing the mortgage market. It shows what an amazing industry it is. Thank you all for your calm voices.
If anyone had any doubts about the direction of the new government, it showed that ideological politics was back in full force.
As for lenders, most are already returning to the market, but at much higher rates. We have also seen some lenders announce new stress tests. The TSB will raise its residential affordability stress test to 8%, citing expectations of higher interest rates, while the stress rate for first-time buyers will be 7%.
The Buckinghamshire Building Society has helpfully opened up its vacation rental products to expats, up to 75% LTV. The property must be considered a furnished vacation rental and be available for rental for 140 days or more per year.
In buy-to-let (BTL), change is also underway, mainly with regard to stress tests. The Mortgage Works enforces a minimum stress rating of 8.49% on all new applications. This change is an interim measure.
NatWest BTL stress rates increased for two-year products from 5.5% to 7.83%, while for five-year and similar mortgages they rose from 5.1% to 7.44 %.
They went out, courtyard side (unfortunately, not chased by a bear)
Elsewhere, MPowered Mortgages has launched its first House Pace Index to shed light on buying behavior. Among other things, the study found that almost half (48%) of properties receive an offer the same day as a viewing, up from 26% in 2018, but half (50%) of offers are unsuccessful. not at a sale. Meanwhile, 31% of properties receive an offer within an hour, up from 7% in 2018, while one in eight (12%) received an offer without a visit this year, up from 7% in 2018.
Finally, to all of you brokers who have never experienced a market like this: keep calm. Don’t worry about things we can’t control, do your best for customers and remember you matter too. You are all doing amazing work and this industry and your customers thank you for it.
Be proud of what you do – it really, really matters.
The calm the voices of brokers in the press, and you all do your best for the customers
Lenders are coming back fast at the market
IR35 Changes – seems like a sensible change
The concern of serious payment shock for those who repay
The lender who reneges on agreements at the last minute, after offer and the day before the realization
Farm and Kwarteng – a new double act of desperation. Get your house in order – quickly
What really makes me cringe?
There are a lot of things that worry me right now, especially with regard to the fierceness of the market, the pressures on rates and the effect on the mental health of brokers. I know this applies to lenders, BDMs, transfer agents and others, but I want to focus on advisors.
The current situation is extraordinary, but even before that there was a worrying trend regarding the timing of some of these withdrawals, particularly late at night or on weekends, leaving brokers no choice but to work at any hour. It is now obvious that we have to deal with this: crashing systems and a host of other things that make it so difficult to book a product.
As one broker put it, “If lenders need to change rates and criteria outside of normal working hours, surely they should be staffed and resourced to answer questions at those times as well.”
We need to have a proper discussion to find together a way to end this problem. Everyone’s health is extremely important.
Andrew Montlake is CEO of Coreco