It’s the here and now that tends to concentrate most of our minds, especially when very few, if any, of the powers that be appear to know what will happen, when it will happen and what the outcome might be.
House prices and interest rates tend to be seen to be key measures of the health of the housing and mortgage market.
Whether this is fair, or indeed right, is another matter entirely, but show me a house price index or an interest rate prediction and decision and I’ll show you acres of news print that will offer some idea of the mindset of most stakeholders.
The national obsession with house prices might well have waned in recent years as inflation has flattened out, but I can guarantee if there were some big falls, or conversely some rises, the level of interest would grow.
Taking Brexit into account when it comes to prices is difficult – the key supply and demand drivers are much closer to home.
As long as this country fails to radically increase the supply of new homes then prices look unlikely to move far from current levels.
Interest rate rises
Interest rates too might seem to be driven by UK factors but inflation is determined by many different influences.
The Brexit trade deal, if there is one, is going to have a major impact on prices and shape the way the MPC moves on Bank Base Rate (BBR).
MPC member, Gertjan Vlieghe, suggested that rates could rise up to six times over the next three years, and was quite firm about the need for at least one or two base rate increases each year between now and 2021.
Of course, that would still only take BBR up to 2% – although for a whole generation of mortgage borrowers it would still be well above the level they have known over the last decade.
It also interesting to note Vlieghe’s uncertainty to how the UK economy might react to a rate rise, coupled with the whole Brexit issue as well.
Borrowers want certainty
It’s perhaps no wonder in such an environment that borrowers are seeking certainty, not just in terms of the advice, but also in terms of their products.
The popularity of longer-term fixed rates might well grow given the level of uncertainty around the UK economy, and clearly when we look at what might be coming over the horizon in terms of rates.
It might well be the sensible option to suggest your clients look at a longer-term fix in order to ‘ride out’ the bumps for three, five or possibly 10 years.
By the time that term is up, we should hopefully be in a much more certain position, and at the very least, have a better handle on how these coming changes are going to affect the UK and the mortgage market.