Predicting the future is a complex equation, holding a heady mix of hope, fear and everything inbetween for different types of people across a multitude of scenarios.
The mortgage market especially has proved itself one that is not easy to predict, due to numerous global economic influences as well as lenders, service providers, technology specialists and intermediary firms constantly driving innovation and ways to become more efficient.
Quite rightly, one diminutive, slightly wizened, balding and mind-altering master once said ‘Always in motion is the future’. This was Yoda in Star Wars Episode V: The Empire Strikes Back by the way and not Paul Daniels contrary to popular belief.
The future is indeed always in motion, as is the market.
Whilst no one can 100% accurately predict future lending and borrowing conditions, there are things we can do to try and introduce some elements of stability, especially when it comes to borrowers’ longer-term financial planning of five years and beyond.
In the first couple of months of 2012, we have already experienced some movement within this particular market. The Post Office has cut the rate on its 75% LTV five-year fixed rate deal and Barclays has launched the Future Fix mortgage, offering borrowers a tracker rate for two years, before switching to a fixed rate for the remaining three years of the deal.
In addition, Norwich & Peterborough released and then pulled its ten-year fixed rate deal and Barclays also re-introduced a ten-year fixed rate product.
The ten-year fixed rate has certainly seen increased media focus and activity recently.
Yet, to put this in context, Defaqto figures show that there are currently just ten deals available, compared to 124 four years ago, showing how far this particular market has fallen and how far it has to go.
Nevertheless, some positive moves have been made and one of the main factors is that more borrowers are thinking longer term about their financial planning requirements, as they seek to establish some security for regular outgoings.
A ten-year fixed rate or even five-year fixed will not be applicable for all clients, but it will be for some.
Importantly, advising on such a product does not mean the end in terms of income generating possibilities. In fact, it can be a case that this is only the beginning.
Once a monthly mortgage payment has been established, it gives clients an increased understanding of how much they can allocate to other financial services products, such as insurance, pensions and investments, so providing intermediaries with good cross-selling opportunities.
It also underlines the importance of having good strategic partnerships in place to make the most of this potential ancillary business.
Many brokers have shied away from advising on longer-term mortgage products in the past. Back in the day, plenty of mortgage business was flying through the doors and short-term deals were being churned out. But we all know those days are gone.
The need for holistic advice has come to the fore, as more and more borrowers have become more financially savvy.
This does not mean such clients will naturally demand longer-term deals, but with options and flexibility slowly emerging, it is an area that intermediaries need to keep their eye on and give real consideration.
Longer-term products can provide a great sense of security for clients happy to lock in their mortgage outgoings and negate the financial impact of the cost of having to remortgage every two to three years.
There is no getting away from the fact that two- and three-year product terms will continue to dominate and there are some highly competitive deals available, especially in the remortgage market to support this.
Fixed borrowing for as long as ten years will remain something of a niche product, although more activity could resurface over the course of the year at this level of lending.
The five-year market is likely to see more action. However, lenders are still battling to balance upward fiscal pressures, funding issues and ongoing eurozone problems, so it is difficult to say just how competitive these rates may be.
Ultimately, the intermediary market and their clients need choice.
Hopefully, we will continue to see the longer-term market grow and gain more flexibility so that borrowers adopting a longer-term outlook will have a greater array of options to satisfy their borrowing requirements.
