If we, and borrowers, have learnt anything over the past year or so, it is that timing is everything in this marketplace.
Go back a year or so ago, and there was an incredible sweet spot where we were able to secure clients 60% LTV 5-year fixes at rates below 1%. How pretty must those borrowers be sitting right now?
Jump forward to the disastrous ‘Mini Budget’ and its immediate aftermath and borrowers were lucky to pick up a fix at all, and those that were available began with a five, not a zero.
Move forward to now and ten-year fixes are currently in the low 4% range, with five-year offerings hovering around the mid-4% mark. And, if you are a borrower who has a little time on your hands, then you might wish to wait until the new year, when lender competition is likely to be incredibly strong and when we could see product pricing continue to track down, even if there has been a Bank Base Rate rise in the intervening period.
All this has happened in just over a year, and clients can be forgiven for thinking that there is something amiss with a market which can fluctuate so wildly in such a short space of time. Especially having had such a benign market over the last five or so years.
And, of course, there has to be a huge amount of sympathy for those whose time had come, so to speak. Who felt they had to do something at the worst time possible.
Or indeed, those who read the headlines and felt they had to do something, even if they could have waited, and may now be looking at a market which already looks very different to what they eventually took back in the Autumn.
One would hope this number is relatively small, and that they received sound advice which either made the best of a bad job or provided them with the advice so they didn’t rashly jump into a deal which would not have been suitable for them. Advice was paramount then, and it is now.
We should also be grateful that we had the opportunity to take advantage of a part of the market which few were expecting to see resurrected, or indeed were expecting to be such a saving grace for many clients and their advisers during this time.
In that sense, it’s all hail the tracker which has not just provided borrowers with a short-term lifeline but as the economy has begun to shift, and with inflation hopefully coming down soon with the expectation that rates will not peak at such high levels, looks increasingly attractive.
Indeed, there may be a significant borrower cohort who may not come off these tracker rates anytime soon. It may seem like a rarity, but lenders certainly need to be praised for their tracker/discount offerings in recent weeks.
We’re all acutely aware that over the last decade, fixed-rates have tended to dominate the mortgage psyche and, with rates as low as they have been, why wouldn’t they?
However, in a higher-rate environment, and most recently where many lenders simply had no clue or confidence in how to price shorter-term fixes, there became a far greater reliance on alternatives and it is to the lenders’ credit that they were willing and able to make these products available.
As we move into a new year, it would be positive to see a commitment to trackers and discounts maintained, especially as we inevitably see a return to fixed-rate product choice with lenders now have a much clearer picture of how to price these products.
Those able to benefit from funding avenues through both their own deposits and the money markets – taking a blended approach – should have the most leeway in this regard, and what borrowers most definitely need is greater levels of product choice.
Recent headlines suggest that the mortgage market has suffered from a considerable drop in product numbers in recent months and we need both an increase in choice alongside a more competitive pricing environment.
There is undoubtedly a significant amount of business to be written, particularly existing borrowers, and with the right product mix we will be able to offer so man more positive outcomes, which will clearly go down well against a backdrop where every penny will count.
Rory Joseph is director and Sebastian Murphy is head of mortgage Finance at JLM Mortgage Services
