Lenders and brokers look forward to a more stabilised market after the period which saw everyone having to react to changing markets, increased rates and product withdrawals.
Speaking on this week’s Lenders Live, hosted by Knowledge Bank, Foundation Home Loans director of commercial development Mark Whitear says since September the market has been “frantic” not just for lenders but for all in the market.
Whitear comments: “We would all like to see a market that stabilises a little bit where rates can stay out there a little bit longer than a couple of days at a time, so we know where we’re at and we can be confident in the advice that we can give everybody.”
He explains that the market has already started to “soften” with lenders in the specialist space.
“Rates are starting to come back down with rates in the mid-5% range again, which seems a lot more palatable, and I hope that continues.”
Last week during the Autumn Statement, chancellor Jeremy Hunt confirmed that the stamp duty cuts announced in the September mini-Budget will end on 31 March 2025.
Hunt said that the Office for Budget Responsibility expects housing activity to slow over the next two years.
“Creating an incentive to support the housing market, and the jobs associated with it, by boosting transactions during the period the economy most needs it,” he added.
Hodge for Intermediaries national account manager Andrea Roberts notes that a large amount of the Autumn Statement had already been factored into the current mortgage rates.
Roberts says: “Prior to the statement, we had already seen lenders coming back and putting new rates and slightly reduced rates out there.”
However, she suggests: “The key for the banking sector was the stability that the Rishi Sunak and Jeremy Hunt has brought to the market.”
“It has stabilised it and everything has settled down enough for lenders to start pricing albeit a much higher rate than where we were earlier in the year.”
“One thing I want to reference is that we expect the next 12 months to be challenging and we are all going to work with customers to support them wherever we can,” she adds.
Last week, research from Octane Capital revealed that the average homebuyer can expect to pay £166 more per month as a result of the latest base rate increase by the Bank of England (BoE) to 3%. Still, this monthly repayment is expected to fall by £188 come this time next year.
Skipton Building Society director of business development at Skipton Building Society Paul Fenn says: “There was a view a couple of months ago that the BoE base rate would peak in Q1 next year and then have a relatively steep decline up to September/October and then level out.”
Fenn suggests this view has changed and “has been pushed out a bit into Q2, with rates staying relatively high and then dropping off”.
“Swap rates suggest that in a couple of years, money will be cheaper than it is now, which is partly why there hasn’t been a massive reaction to the autumn statement last week.”
However, Fenn highlights: “It is going to be difficult for the foreseeable and the tax impact from the statement is going to affect everybody along with the fuel and energy challenges, everyone is going to feel less affluent for the short to medium term.”
He suggests there’s an “interesting dynamic” for brokers and lenders.
“We saw a significant increase in business in September when consumers were looking to secure the rates but now this is changing, we could see an increase in customers continuing to look to secure better rates and see our application pipelines erode because there might be some slightly better rates on the market.”
“It will be interesting to see what happens with the offer pipelines over the next few months. It’s so complicated and so confusing, so brokers and advisers are in the perfect position to help the customer.”
“Notwithstanding all of that, we have been in an environment for such a long time where we have got used to really low-interest rates and now we’re getting to a point that in the next 12 to 18 months we’ll find the right balance and that’s where the market is going to stick and stay there for some time as it would’ve done 10 to 15 years ago.”
Knight Frank Finance associate sales manager Huy Le explains that with the low-interest rate environment that has been around for the last seven years, the advice has been to fix for a long period.
But in the current environment, Le says: “As rates return to where the banks want them to be, it gives us more of a respect for money.”
“Lenders are going to come back with better product innovation and more product availability not just fixed rates but also trackers, variables, offsets, etc.”
Earlier today, Moneyfacts data revealed that the average rate for a five-year fix has fallen to 5.95%.
At the start of this month, it stood at 6.32% and, at the end of October, the average rate for a five-year fix had been priced at 6.51%.
The two-year fixed average rate has also fallen across the same time frame, although it is some way off the 6% mark. As of today, it is 6.13%, having fallen from 6.47% at the start of this month.
At the end of October, the two-year fixed average rate was 6.65%.
Le explains: “For advisers, this is the perfect time to really listen to the needs and preferences of our clients and give the most suitable advice to your client at this time.”
“It is really hard to forecast what is going to happen or what might happen, you can only advise on what’s in front of you right now and it’s really important to listen to your client’s preferences.”