The fallout from the ‘Mini Budget’ proves the value of mortgage advice

I hesitate to speak too soon, but it is to be hoped that some of the political chaos we have witnessed over the last couple of months has now finally come to an end, and we can begin to have a Government that appears to know what it is doing.

That is a ‘luxury’ we have certainly not had and I would defy anyone to put up a strong case for suggesting the actions of the short-lived Liz Truss Government haven’t made things worse, particularly in the mortgage and property markets.

There are a number of things to unpack from the recent political changes we have seen, not least the return of Michael Gove to the Department of Levelling Up, Housing & Communities, and the reiteration of the Conservative Party’s 2019 manifesto as a series of policies to be delivered upon.

That is interesting, particularly in terms of housing supply, because as you’ll remember it was the manifesto which suggested this Government would achieve 300,000 new properties per year by the middle of the decade. If that is now the target again, it is welcome, although there is going to need to be a huge increase in supply over the next couple of years in order to get to that figure.

Supply remains a huge issue for the UK market and, even if recent weeks have seen a dampening of demand, then the fact remains we do not ‘produce’ enough homes for that demand, and it is going to require a concerted effort, and perhaps further significant Government intervention in order to get there.

Supply of course is not the only issue to be addressed. One of the other major problems for the mortgage market, and advisers in particular in recent weeks, has been how to deal with borrowers coming to the end of their existing deals, or (in many cases) how to deal with borrowers who aren’t anywhere near the end of the deals, but are just incredibly worried about what market/products/options they are going to find when they get there.

The sharp increase in rates we have seen across the entire sector continues to bring with it a heightened state of stress and worry to hundreds of thousands of borrowers, some of whom will have far less options now and are likely to have to accept deals at rates far in advance of what they had become used to.

There is a slight ray of light in that regard, with the markets appearing to have been calmed by recent political changes, and swap rates having dropped back to the point they were pre-‘Mini Budget’.

However, there appears to be little doubt that Bank Base Rate will be increased in November, and we have ‘broken’ out of the previous interest rate banding. You only need to realise that pre-‘Mini Budget’ average five-year fixes were below 5% and now they are only just below 6.5% to realise this.

Rates appear to have inched down in the last few days and let’s hope that this continues, but we are in a different space and it looks likely we’ll move as quickly out of this pricing range as we moved into it.

Two-year fixed-rate deals not only appear short in supply, but those that do exist come with very high rates. It reminds me of that old Woody Allen joke about two women eating in a restaurant. One says, “Boy, the food at this place is really terrible,” and the other replies, “Yeah, I know; and such small portions.”

It’s not yet possible to rejoice in some lenders’ cutting their rates by far less than they increased them in the first place, and not returning to certain product areas because the cost of funding them is far too high to make them competitive. I’m afraid that there is likely to be no ‘quick fix’ with that regard, and we’ll be living with the mistakes of the ‘Mini Budget’ within the mortgage market for many months to come.

Positively, this period has once again shown the value of advice and the absolute requirement to secure the services of a professional adviser. I know advisers will probably have worked themselves to a standstill in recent weeks, but without you, I hate to think what some borrowers might have felt they needed to do, when their actual situation just required them to either keep calm, or when there were simply far better options available to them than they realised.

We fully anticipate that the remortgage market in particular will form the bedrock of our market for many months to come, and that in itself should provide advisers with the opportunity to diversify and cross-sell across any number of other client wants and needs. Conveyancing being one of them.

It is to be hoped that our market continues to be calmed by political certainty, that rates do not have to rise by as much as speculated, and that lenders are not in a position where they have to continue offering products way beyond swaps and/or bank base rate. One thing is however certain – at a time when the market is in such flux, advisers will be much in demand, so make the most of it.