It’s somewhat amazing how recent increases in Bank Base Rate (BBR) are being peddled by a wide variety of lenders as being wholly responsible for their continued, upward trend in product pricing right now.
It would appear that a BBR rise is the catalyst for a multitude of sins, and that lenders can’t possible be responsible for the fact that the upward escalator of pricing never seems to slow down, and that advisers and their clients are having to continually deal with the regular fallout that such rises and daily product pulls give rise to.
To say that this is a clear BS argument effectively attempting to justify the unjustifiable goes without saying, however we suspect that lenders will continue to plough this furrow in order to lay the blame at someone else’s – namely the MPC’s – door.
However, let’s call out the lies for what they are, and let’s instead concentrate on the facts.
The fact that advisers are having to carry out two times the amount of work to get the same result is not because of Bank of England base rate increases.
The fact that lenders didn’t enter 2022 wholly unprepared for a strong year of purchasing is not because of a Bank of England base rate rise.
The fact that lenders cut great swathes of resource in the first 2020 lockdown and have never been able to get anywhere near the levels required for a fully-functioning market, has nothing to do with base rate.
That’s just three facts that ultimately result in the poor experience for advisers and their clients right now. Let’s call this out for what it is – constant product price increases, the pulling of products with barely an hour’s notice, the desire not to be anywhere near the best buy tables at the moment, is not a consequence of four consecutive BBR rises coming out of Threadneedle Street.
It is a consequence of a huge ‘service crunch’ internally and a constant fear factor that they will be left as ‘last lender standing’ and, given they are unable to cope with the level of business they are getting now, any more will effectively push them over the edge.
BBR moving up to 1% is not forcing their rates up. This is a conscious decision designed to ensure their poorly-resourced operations are not pushed even further underwater. The problem is, of course, that this is a never-ending spiral, infecting the entire lending community, with nothing tangible being done to sort out the mess other than price increases. Which consumers have to stomach whilst being fed the pack of lies that there’s really nothing we can do about it.
All this at a time when the cost of funding bears no relation to the pricing, and where the cost of living right across the board for every consumer goes higher and higher.
It’s why we have a situation where currently one of the biggest mainstream lenders tells us they don’t want to be anywhere near the top five when it comes to the best buys. It’s why the same lender is likely to get to a point where it will soon have no product available below 3%, regardless of LTV.
But yes, this is all to do with BBR? After all, back pre-pandemic in 2019 when BBR was 0.75%, all products were at least 2% above that level, weren’t they? Oh no, they weren’t that’s right, but now they have to be because BBR has gone up to a level of, lest we forget, 1%.
And for advisers? Well, it means that one we know currently has three phone lines – one to accept incoming calls and two constantly on hold to lenders. It’s why we are constantly having to tell clients that, a quite reasonable thinking time of say an evening, might well result in them losing out on a product/rate because they can be pulled at the drop of a hat.
Something needs to be done. Constantly increasing pricing to deal with a service problem is not sustainable.
We know that lenders expected the market to be X, and it has turned out to be Y, but do something about that. Perhaps introduce a fund booking option – it’s nasty but effective. Follow the lead of other sectors like equity release and allow advisers to secure the KFI and then give them time to submit an app, rather than pulling the product rug out from them. Allow the customer to pay a booking fee upfront to secure the rate.
It would help while we assume you are trying to sort out your resource issues, and it would not hit borrowers in their pockets when this situation is not their fault, and it is certainly not the fault of BBR going up. It would also give advisers a much-needed degree of certainty, sorely lacking at present.
We get that the market has surprised you, particularly purchase activity, but there are other tools in the locker available, and there is certainly the opportunity to tell consumers the truth, rather than hiding behind the MPC.
Rory Joseph is director and Sebastian Murphy is head of mortgage finance at JLM Mortgage Services, the mortgage and protection network
