Just recently – in the lifetime mortgage space – there have been a few moves which might suggest that peak has been scaled and we are moving down the other side. I would caution against such a view.
There have been some recent product cuts by some providers, and I’ve seen some adviser views on social media suggesting that the upward rate trend may well be over, and that perhaps sitting on cases for a little longer would mean they can secure an even more competitive price.
The assumption is that when a small number of providers move, this can create a ripple effect, and others will join the throng. I’m not so sure this is likely, certainly not in the short-term, and I would probably suggest to advisers that if they can secure such rates now, they shouldn’t wait for them to move lower. There is a good chance they will not.
Prepare for rate hikes
Again, some providers have cut rates, but I don’t view this as a pattern to be followed right across the board. If anything, this is a short-term play by those providers, seeking to secure some mid-summer market share, and using rate as the driver to gain this.
If I thought this signalled the end of the upward trajectory, I would say so, however if you look at the mood music around rates, then it seems to be singing a tune entitled, ‘The Only Way is Up’.
Just this last week we had the governor of the Bank of England, Andrew Bailey, saying that a 50 basis points Bank Base Rate (BBR) rise is on the table at this month’s Monetary Policy Committee meeting, as it seeks to use the only tool it really has to try and bring inflation down.
As a sidebar, just how successful do we think this is going to be or has been? Inflation hit 9.4 per cent – the ninth month in a row showing a rise – with it likely to increase further to double-digit figures soon enough.
The governor himself has said that the vast majority of inflationary pressures causing prices to increase are beyond the Bank’s control, so how does making people’s mortgage payments more expensive, bring down the cost of bread or petrol or energy bills? It doesn’t; it just adds more cost to the average homeowner at a time when they are trying to fund the rising cost of other bills and services.
However, I suspect the Bank will persist with this, until inflation does start to turn, although again, just what impact rate rises will have in bringing this about seems like a very moot point.
Product rates have not topped out
But back to product pricing and rates in general.
My view is that we have yet to hit the peak. We are probably experiencing something of a summer lull, and those couple of providers who feel they can bring in the business that exists out there during the next six or so weeks, are using a price cut to generate interest and activity.
Good for them, and good for those advisers who can secure these slightly cheaper rates for customers.
But we certainly shouldn’t think this is going to be a market-wide approach, and advisers should probably not adopt a ‘wait and see’ view with these cases, because by the time you’ve waited, you might see prices moving back up.
Grab those rates while you can because they may not be around for very long.