Hello, dear readers, or those of you listening to this on some new-fangled AI audible software.

After last month’s tight-deadline shenanigans, I started to write this almost on time, but the Euros got in the way and now I’m back to the regular late-night slot.

It is tricky to know where to start this month — especially as I am painfully aware that I am writing this before the election and you will be reading it after the results are in and the new PM is safely ensconced on proud buttocks behind the desk at Number 10, fresh-faced and excited about all the good plans he intends to implement.

A stable government, focused housing policies and the potential for an interest rate cut could see a huge amount of pent-up demand unleashed

Hopefully, this PM will at least last the full term and will not have quite so many earth-imploding events to deal with, although politics has a nasty habit of producing ‘Hold my beer’ moments.

Whatever happens, and I think the result may be slightly closer than predicted, we all hope to have a period of stability; one without ridiculous, unfunded spending or a crashing economy but instead with a focus on careful growth, on healing divisions rather than creating them, and on putting housing back at the top table.

It has been a torrid campaign, only made less depressing by the thought that it could be much worse: we could be in the US! There is a saying that we all get the leaders we deserve, but really? Seeing two male, white octogenarians clash over who has the better golf swing is a sad indictment of the state of the world.

There seem to have been lies aplenty on both sides of the pond, while in Europe the worrying spectre of the rising Far-Right highlights some challenges to come.

A rate cut in August, or at the very least September, must surely be on the cards as the Bank is running out of excuses

I really hope that, if Sir Keir is sitting in Number 10, he sticks to what was promised, listens to his team and does not get sidetracked by other factions in the party.

I hope they do not prove Rishi right but provide a sensible, left-of-centre agenda that helps us all as an industry as well as society as a whole. They have one hell of a challenge.

Who knows? Within the first month of a new government we could have a massive feel-good factor with England winning the Euros (yes, I know), a good showing for Team GB in the Olympics and, now that inflation is back at target, an interest rate cut to boot.

Rate reductions

Given the recent fall in inflation — which was nothing to do with government policy, Rishi — and a slight ease in swap rates, we have seen more than a few lenders, including the big guns, start to reduce rates.

The question is whether these reductions could be the starting pistol to a campaign of ‘Summer Sizzlers’, after demand for mortgage finance tailed off in June as a combination of sun, football, politics and the lack of an interest rate cut saw many potential buyers lose focus.

Whatever happens, we all hope to have a period of stability

With sellers also adopting a wait-and-see approach before the election, June may well mark the calm before the storm. A stable government, focused housing policies and the potential for an interest rate cut could see a huge amount of pent-up demand unleashed.

It was interesting to read Aldermore’s survey report that found around 46% of potential first-time buyers believed that the upcoming election would improve their buying prospects.

More lenders joining the rate cut brigade means that borrowers could find they have a greater share of power after the election. However, with a shortage of housing as it is, it won’t take much for prices to head north once more, leaving buyers once again shopping in a sellers’ market.

As for the Bank of England (BoE), although there is still a concern that inflationary falls may be temporary and could bounce in the last quarter of the year, the country desperately needs the boost of a cut to relieve some of the financial strains that have held back the economy and put borrowers under immense pressure.

It was nice to see some of the industry’s finest move into big new roles

We need brave action, and a cut in August, or at the very least September, must surely be on the cards as the Bank is running out of excuses.

So, what of these precocious swap rates? Well, three-month Sonia has lost interest like many voters and stayed stubbornly at 5.23%, while swaps have flip-flopped like an undecided voter during a leaders’ debate. Since the previous column:

2-year money is down 0.12% at 4.48%

3-year money is down 0.09% at 4.25%

5-year money is down 0.04% at 3.98%

10-year money is up 0.04% at 3.88%

The mortgage and housing industry continues to be an interesting place and a few things have caught my eye.

In its quarterly Financial Policy Summary and Record, the BoE warned that roughly three million households were set to see their mortgage payments go up in the next two years. For the most part, however, it does seem borrowers have been quick to anchor themselves to the new rate environment and accept that the good old days of artificially low rates are over. They are more relieved that rates will no longer rise to 6% than hopeful that they will fall to 2% to 3% again.

We should not be afraid of AI if we harness it correctly

Mortgage arrears also “remain low by historical standards and are expected to remain well below their previous peaks”. That said, a lot of borrowers will need the advice of a friendly broker like you, so keep in touch with your clients or someone else will!

The green discussions will no doubt come back on the agenda soon, and Rightmove has reported that 18 million homes have a rating on an energy performance certificate (EPC) of D or below, some 55% of housing stock. This shows the scale of the challenge, and it is incumbent on all of us to help educate clients on how to improve their rating.

In lending, Barclays has changed the amount of equity required where there is an interest-only element to a tiered approach based on property location, ranging from £200,000 to £300,000 in London.

NatWest has increased the maximum LTV for new-build properties, with new-build residential houses now available to 90% LTV, and residential flats up to 85% LTV. It will also allow certain borrowers with a strong credit score to obtain up to 5.5 times income.

For the most part, borrowers have been quick to anchor themselves to the new rate environment and accept that artificially low rates are over

Nationwide has a new tool to enable it to automate the verification of income.

Meanwhile, BM Solutions, which previously restricted any loans over £1m to EPC A–C, now has products between £1m and £2m that are available on properties with EPC D, E and Exempt.

I was also interested to see that the MPowered Mortgages AI chatbot has solved 60% of queries put through to the lender, which shows what good tech can do. We should not be afraid of AI if we harness it correctly. I have been an AI-generated hologram for months and am actually on a beach in the Maldives, sipping raki and reading Maynard Keynes.

Hopefully, this PM will at least last the full term and will not have quite so many earth-imploding events to deal with

Finally, it was nice to see some of the industry’s finest move into big new roles.

Congratulations to Andy Dean, new head of housing and sustainability at Lloyds, and Vikki Jefferies, L&G’s new market development director.

And, in true The Godfather Part III fashion, Alan Cleary comes out of retirement to chair Chetwood Financial’s mortgage advisory board.

“Just when I thought I was out, they pull me back in!”

That’s the mortgage industry for you, folks!

This article featured in the July/August 2024 edition of Mortgage Strategy.

If you would like to subscribe to the monthly print or digital magazine, please click here.

The post Market Watch: Housing at the top table? appeared first on Mortgage Strategy.

​