Glass half full
It is amazing how quickly market sentiment can change. Thinking back to how we were looking at the mortgage and property markets just a couple of months ago compared to the outlook now, I think we can agree that 2024 is looking brighter now than it did in October. Swap rates did stabilise for a while, allowing the current rate reductions we have seen in the market, but have started to creep back up again. The base rate hasn’t gone up since the start of August ‘23 and the economy grew a little in November (avoiding a technical recession).
Is there light at the end of the tunnel? I’m leaning that way but then I have always been a glass half full person. Mind you, there are still a few question marks preventing me from breaking out the champagne just yet.
Will mortgage rates continue to fall in 2024, or will we just see a continuation of the current lender market share war until they have hit their quotas? Although lenders dropping rates is good news and will help consumers and brokers, the real stimulus for confidence and growth will come when we start to see house listings rise. Of course, with lenders reducing rates, there will still be those who continue to wait for rates to fall further, hoping to call the bottom of the rate drop and lock in the lowest possible deals. Having some rate stability and higher property availability could encourage people out quicker than expected for fear of missing out. And some people can’t or won’t wait any longer than they really have to. They may need to move for jobs or because they have outgrown their current homes.
Their decision making would be helped if house price indices were more consistent. In January the Halifax index said house prices had risen for three months in a row whilst Nationwide’s says prices were flat in December at best. When two of the biggest lenders in the land offer different views based on their own mortgage application data it makes it more difficult for everyone else to predict.
The Spring Budget in March could be interesting, especially as it may be the Government’s last real chance to convince voters they deserve another term. Initiatives to stimulate the housing market historically go down well with lots of the electorate, as we saw with the last stamp duty initiative during and post covid. We all feel better off if we think our homes are a sought-after commodity increasing in value. We have seen reports of the 99% mortgage in the press and rumours of a replacement for the Help to Buy scheme to encourage FTBs into the market or maybe another stamp duty holiday, who knows. The challenge with short term incentives is just that, they are short term and cause artificial blips to the market. I think it is more important for a Government to create a long term solution to stamp duty making it more equitable than the current slab approach and to sort out the planning system and allow housebuilders to build more homes more easily.
What’s next from the FCA on Consumer Duty? Consumer Duty is different to the likes of the Mortgage Credit Directive or MCOB. Both of those asked for businesses to comply with new rules by a certain date. Once in place that was it. Box ticked. With Consumer Duty, the 31st July 2023 was the start of the journey, not the end. At some point the FCA are going to start knocking on doors asking what we’ve done with all the data and information we have collected and how we have used that data to improve service and products for customers and, most importantly, evidence those changes and the positive outcomes. Consumer Duty is going to remain an important consideration for lenders and brokers this year.