Back then, there was certainly a vibrancy and, while many were predicting the year ahead would be the ‘year of remortgaging’, there was actually considerable strength ahead for purchasing as well.
Currently, we are in more of a pre-Christmas lull, and when it comes to buyer demand specifically, we are some way removed from a year ago. Latest figures from the Royal Chartered Institution of Surveyors (RICS) suggested buyer demand has continued to fall – for the seventh month in a row.
And (at least initially) that may mean more of a focus on remortgage and product transfer activity.
However, the mid-weeks in December are not going to tell us the story of what lies ahead in 2023 and, in my opinion, we are likely to see a very different story when everyone comes back in January.
A rush of activity
Many of the lenders I’ve been in contact with are effectively steeling themselves for a major push come the start of the new year, and I fully anticipate a considerable amount of movement and initial activity in those initial few weeks.
The Bank of England Base Rate has risen yet again. However, when you look at current swap rates, you realise there is room for movement, given the significant differential we are seeing between product rates and the cost of funds.
Again, as I write, three/five and seven-year SONIA swaps are below four per cent – the latter two by a considerable margin – and even with lenders adding to their requirements, we are still likely to be at a level well below current market norms for fixed rate products.
In that sense, as mentioned, I think we will see plenty of movement in rates early in 2023. This should draw in a considerable amount of business.
First, those purchasers who have perhaps been waiting for better rates, and of course, it will help the large number of existing borrowers who will need to refinance every single month next year, but particularly from January to June, when we anticipate a heavy amount of maturities.
Help for borrowers
If, as anticipated, it is refinance activity which becomes the bedrock of advisers’ businesses early next year, then there is certainly something to be aware of in the government’s recent summit meeting with certain lenders, which discussed help for those struggling with payments.
To be honest, the messages coming out of this meeting – including the offer of targeted help, potentially dropping the monthly amount, switching to interest-only and extending the term – don’t appear to be any different to what responsible lenders have practised in recent years.
During the initial stages of the pandemic, particularly the first lockdown, we saw lenders offering similar options and I’m not sure they have been off the table for borrowers who are potentially struggling with payments since then.
However, it is good to reiterate to borrowers that – should they need to – they can go to their lender and get a fair hearing and help. As a profession, we should definitely be making existing clients aware of their options, should the monthly mortgage payment become more difficult to fulfil.
One other point that was raised out of the meeting, and again I’m not sure this is new but deserves some adviser thought, is the notion of lenders not requiring affordability tests for existing borrowers coming off fixed rate deals who have not missed any payments.
Lenders will no doubt be using this a lot when presenting product transfer options to existing fixed rate borrowers, and there may be a temptation on the borrower’s part to immediately accept the offer, thinking they have no other option but to do this.
It’s vitally important as advisers that we communicate to existing clients, coming off any remortgage deal, that the product transfer deals offered are just some of what could be available to them. That they should bring those deals back to the adviser so they can go through the full remortgage process to make sure this is truly the right deal for them.
Of course, the fact there will be no affordability test could be a dealmaker for certain clients and the adviser can recommend they take that in full confidence. However, with the market likely to change a lot (and quickly) in 2023, there should be no temptation on the client’s part to take the first product transfer offered to them.
Advisers need to be the first port of call
During that mid-mini Budget period, we saw a step change in many consumers’ thinking about how vital advice was during a volatile period, and while that volatility has receded, they may be many still under the impression that their choices are limited to their existing lender and the product transfers they offer.
We need to make sure they know full well that isn’t necessarily the case and that a discussion with an adviser should always be the first port of call.
