A word on the mortgage market from Mortgage Force Ltd

Hello and welcome to the latest edition of A word on the mortgage market. One day we will be able to send you this newsletter without any drama within. The world will once again be calm, and we can all go about our business without a large dollop of worry and concern. Sadly, that day is not today.

We will at least try to brighten your day with a few pictures of nice houses. It's not much, we know. Because, at the risk of sounding a little over dramatic, it’s pretty chaotic out there. Luckily, you have us in your corner. Anyway, let’s take a look at all the key details.

The wider financial context

Inflation

Let’s begin with that perennial pain, inflation. When last we spoke a few months ago, the rate of inflation remained in double digits, at 10.4%. Since then, it has eased off a little, but not to the level that many people had been expecting.

The latest figures were published just two days ago. They revealed year on year inflation in still running at 8.7%, the same figure as last month. It’s now clear that wage rises and service price rises have taken over from energy prices as the main cause of inflation. This is hardly cause for celebration, that’s for sure.

To offer a mild ray of hope, a quick look at the Producer Prices Index. This measures the rate of change for prices leaving manufacturers. It came down from 5.2% to 2.9%, suggesting supply chain pressures are easing.

Interest rates

Just yesterday, the Bank of England’s Monetary Policy Committee voted to once again raise interest rates, for the thirteenth time in a row. Unlucky for everyone. However, this time they did it with a difference, bumping it up by 0.5%. The rate now stands at 5%, the highest level it has reached for 15years. As with all bank rate decisions these days, the expectation of an increase had been highly publicised in the media. And equally highly expected by the markets and mortgage lenders alike (much more on that to follow). But, for some, the 0.5% change came as a shock.

Perturbingly, given it wasn’t so long ago that most commentators were talking about this being the peak, there is a growing clamour that we may hit 6% by the start of next year. The aforementioned inflation figures are not helping the argument of those who think this may be a tad on the high side.  Although it should be noted that the Bank also declared yesterday they still expect inflation to fall away significantly in the coming months.

That being said, we are still struggling to see that as a scenario that will play out. But we think we should certainly be prepared for some more upward movement soon. But, of course, if the last 12 months has taught us anything, it’s that making predictions is a fool’s game.

It's always good to look across the pond and in mainland Europe to get aa broader perspective on interest rates. Last week, in the US, the FED called a halt to their programme of rate rises which began in March 2022. They have a range of 5-5.25% and declared they were pausing for now to see what further data looks like. That seems like a very sensible approach.

Last week also saw the ECB’s latest interest rate decision. They chose to increase their rate by 0.25% to 3.5%. At the same time, they indicated that there are more rises on the way. But we wonder whether there’s a good deal of rhetoric at play here to try and influence other things.

Swap rates

To briefly remind you, swaps are the rates that lenders lend to each other on and are a key determiner of mortgage rates. And the bad news is that they are a fair bit higher than they were a month ago. At the time of writing, 5-year swaps stood at 4.83%, well over 0.5% higher than they were just a month ago. We do feel that this is an (let’s be kind and call it mild) over reaction from the markets.

In addition, and we don’t say this lightly, there does feel like a little profiteering is in the air. From both the markets and, depressingly, mortgage lenders. We’re about to tell you more.

What does this all mean for mortgages?

Where to begin. The last few weeks have been very challenging. When we arrive at our desk in the morning it is usually to a good number of emails. Emails from lenders advising that they are pulling their rates. Some of them without replacements, and some of them with replacements that are (perhaps unsurprisingly given all we have said so far) significantly higher.

To provide a little more context, last week one leading high street lender gave us 8 hours’ notice that they were pulling their deals. And replacing them with mortgages that were 0.75% higher the next day. Now, we are not in the habit of bad-mouthing lenders. But some of these decisions feel very over the top and, as we hinted at a moment ago, smack of a bit of profiteering.

However, as you know, we always like to look for silver linings where we can. Who doesn’t? And thankfully there are some. Not all lenders are following this approach. Some are holding firm with better rates as they look to meet their lending targets. So, if you know where to look, it’s not all doom, gloom and other negative words that end in ‘oom.

Now, it would be disingenuous for us not to point out that you would expect us to say this. But this does bring firmly to the fore the critical need to stay in touch with your adviser.

If the time for a new product is upon you or fast approaching, 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 (should one become available) as they have access to the lenders most up to date products every minute, of every day.

Do you know someone we could help?

If we could sum up what we’ve written so far, we’d say it was tough out there.

You will hopefully know is well enough by now to acknowledge that we take great pride in securing the most appropriate products for our clients. No matter what the wider market is like.

So, without a hint of expectation, if you think we could do that for someone you know please do pass on our details or this newsletter to them. In challenging times, we’d love to help as many people as possible

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.

Give us a call:  01354659425
Send them an email:  march@mortgageforce.co.uk

All that legal jazz

Of course, you know this, but it never hurts to remind you that:

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP REPAYMENTS ON YOUR MORTGAGE OR OTHER LOANS SECURED UPON IT.

We should also remind you that if you have an interest-only mortgage please make sure you have a suitable and viable method to repay your mortgage at the end of the term.

And some of the products contained in this newsletter are non-regulated, such as Buy to Let mortgages and, accordingly, the protection that is normally afforded on regulated products do not apply.

Interest rates may go up as well as down. Make sure you can afford your mortgage repayments and review your budgets frequently. Should you experience or foresee any difficulties, speak to your lender immediately. For advice in relation to your circumstances on a specific matter, please ask us for a personal illustration.

Mortgage Force Ltd does not give advice and we are neither a lender or a broker.

Each advising firm is owned independently and they will set out the way they work in the initial disclosures to you and are directly authorised and regulated by the Financial Conduct Authority. Mortgage Force Ltd is registered in England and Wales No: 4085458.