Up until the surprise result of the EU referendum vote, the
mortgage sector was doing well.
Lending figures were consistent for the most part, with the
exception of seasonal adjustments and of course an unusual spike
earlier in the year due to landlords rushing to beat stamp duty
hike, followed by the expected dip. So a month after the Brexit
vote, where does the market stand? Personally, I think it is still
too early to tell definitively, but everything indicates that the
sector is continuing to do well in spite of what the doom mongers
will have you believe. I'll touch on this later.
Amidst all of the speculation, it is important to keep in mind
that no one can accurately predict the future of the market.
Educated guesses can be made based on available evidence and the
authorities can use this evidence to help steer the ship in a
desired direction (to borrow our ex-prime ministers' analogy), but,
no one can predict the future of the market with 100%
For this reason, the monetary policy committee (MPC) decided to
hold to the Bank of England (BoE) base rate in July - despite a
vast majority of Economists predicting a reduction based on
Governor Mark Carney's earlier hint. The minutes of the meeting do
indicate however, that committee members are prepared to take
action in August, when more evidence has become available.
The evidence available for the mortgage and housing market is
not going to be easy to decipher though. Due to the stamp duty
changes earlier in the year, it is difficult to tell how many
buyers brought forward their decisions to purchase, and what the
resulting downturn in the market would have been on its own,
without adding Brexit to the mix.
That being said, there are plenty of positives for the adviser
community. Whilst the vote and upcoming negotiations to ensure
'brexit means brexit' represent anxiety, demand for property is and
will remain high.
There is already an enormous shortage of housing in the UK - a
place where aspirations of owning a home are on a vast majority of
people's mind. The construction products association (CPA) predict
a slowdown in growth for the construction industry, which indicates
that the shortage of housing is going nowhere in a hurry.
Furthermore any changes made to the BoE base rate by the MPC
will also ensure that advisers remain busy. A new record low
interest rate will make buying a home more affordable. In addition
to this, there will be no shortage of funds to lend responsibly,
after Mr Carney ensured of this in an announcement that injects a
potential £150bn into the economy.
A reduction in rates will be good for existing borrowers too.
People currently on tracker rates will benefit instantly but others
will benefit from seeking advice to take advantage of cheaper
interest rates as lenders continue to battle over business. The
re-mortgage market could be a hive of activity regardless of the
direction of house prices.
On the other hand, if the base rate was to be subsequently
increased in the future to bring inflation under control (the main
objective of the MPC) due to a weak currency, this could also
prompt many existing mortgage holders to seek advice.
In this battle for business, lenders are innovating too, for
instance 'intergenerational mortgages' and 'equity release' are
starting to become more common terms in the industry. New products
continue to surface, such as the range of new 10 year fixed rates.
And lending criteria carry on being tweaked to cater for borrowers
more intricate needs, a fine example of which is how borrowing in
later life is starting to become less difficult as lenders remove
or extend maximum age limits.
As things continue to unfold, let us be cautiously optimistic.
Let's continue to keep consumers at the heart of what we do. Lend
responsibly, and of course protect what matters to our clients.
Lee Travis, Head of professional development -
Society of Mortgage Professionals