31st March 2023

Hello and welcome to March’s edition of A word on the mortgage market. To say we have much to discuss would be an understatement of significant proportions. Since last we met, there’s been a raft of relevant news (and not the type of raft many of us could use right now given it’s been pouring down for what feels like an eternity).
 
We’re going to spend some time highlighting the important wider news, before giving our thoughts on what this means for you and your mortgage. After all, that’s why you come here.

Let’s begin with inflation
The bane of all our lives, well one of them at least, is inflation. As you’ll no doubt be all too aware, it’s been rampant for quite some time now. But recent news has revealed an expectation that it with fall significantly, on both sides of the pond, in the coming months.
 
Last week, the US announced a slight fall in their inflation to 6% (down from 6.4%) in the previous period, but in the UK it’s gone the other way. Jumping from 10.1% in January, to 10.4% in February, the blame was laid (at least in part), at the door of salad and vegetables. Perhaps the first time such inoffensive consumables have been highlighted as an enemy of the state.
 
There is still a widely held perspective that this was a blip and that inflation will fall throughout 2023. We live in hope.
 
The Spring Budget
To be honest, from a mortgage perspective, there’s not much to see here. Please move along.
 
The Banking Crisis 2.0
The real news at the end of last week and the start of this one came from the collapse of several banks. In the US, a couple of banks who were heavily focused on the tech sector capitulated, briefly sending panic through the market. Yet it was the imploding of Credit Suisse that really got everyone jittery. Stock markets reacted badly at first but bounced back.

Although we are highly unlikely to witness a full-on banking crisis, such as the one we saw in 2008, we are at a critical junction. How central banks react to this and the measures they take are likely to go some way to defining the financial outlook for months to come. Which is the perfect segue to what is to follow.
 
Interest Rates
In Europe, the ECB went ahead with a half a per cent rate hike last week, although they framed that in their press conference by stating that they would be ready to take immediate action if needed. Their rationale was two-fold. Firstly, they were determined to fight inflation, which remains way above their target. And secondly, any prospect of a banking crisis was receding as banks were in a much better financial position in terms of capital and liquidity than they were in the last financial crisis. Stateside, the FED went with a 0.25% rise earlier in the week.
 
Closer to home, the Bank of England’s Monetary Policy Committee decided to raise interest rates yesterday, but only by 0.25%. Primarily, we believe, as a response to inflation. It now sits at 4.25%. The general feeling a few weeks ago was one final 0.5% increase, so we guess that a quarter point rise is some sort of bronze lining. It still feels just a tiny bit too early to call this as the end of the rises, but we wouldn’t be surprised if it was. As always, watch this space.
 
Swap Rates
As you know, there has been an expectation on the journey of the main rates for quite some time now. But, when it comes to mortgages, we like to look more closely at Swap Rates (the rates at which lenders lend to each other and a key determiner of mortgage rates) to map their path. 5-year swaps have been hovering around the 3.6% mark for quite some time now. Over the last few days, they have edged down a little, and now sit at 3.59%. But given all of the above that’s not a surprise.

Despite the overall ship feeling a little wobbly, mortgage rates have been steady for quite some time now. Relatively speaking. The best five-year fixed rates can be found below 4% if you have a decent deposit or equity. In the two-year market, that figure is a little higher at 4.3%.   In the two-year discount and tracker market, starting rates are a little lower. Many of our friends in the UK’s building society market are offering 3-3.5% discounts from their Standard Variable Rates, which give a pay rate of around 4.1% (although these ay well rise al little to follow the path of bank rate). So, if we have reached the peak of bank rate, or even if there is a smidgeon more to come, these look like offering pretty good value.   There are over 1.4 million mortgages coming to the end of a fixed rate in 2023 and with the general volatility we are all witnessing it’s never been more crucial to stay in touch with your adviser.   Not only are they able to advise you whether to remortgage, or simply switch to a new mortgage with your current lender, they are able to secure the best rate at the time. And they can even change to a better rate at a moment’s notice as they have access to the lenders most up to date products every minute, of every day.   Finally, as always (and you are probably a tad bored of us saying this) no amount of generic advice will do. So, talk to your adviser, who will go through your own unique circumstances to help find the best solution for you.   The importance of financial protection If all this news and horrendous uncertainty tells us one thing, it’s that being protected come what may is crucial. So, a very gentle reminder that if you find yourself without protection, we can help. The key policies we offer are:   Income Protection A policy that provides a regular, tax-free income if you are unable to work due to sickness or an accident.   Critical Illness Cover A policy that pays a lump sum that helps to pay off your mortgage if you are diagnosed with a number of specific critical illnesses, including heart attacks and cancer.   Life insurance A policy that pays out either a lump sum or a series of payments should you die during the term of the policy. Normally, the payment is tax-free. It's good to talk We very much hope you've found A word on the mortgage market useful and interesting.  If you'd like to discuss anything we've talked about, or indeed if you have any other mortgage related needs, then please do get in touch with your adviser. Until next time, we bid you adieu.