Another month is upon us and we are all cheered by the sunshine — well, today anyway — the endless bank holidays and the fact a new king is to be crowned, reminding us just what it is to be British and together — well, that’s the general idea.
I know it seems a bit excessive, seeing so much dosh splurged when so many people are struggling amid a cost-of-living crisis, but it doesn’t happen very often and it will provide a day of joy for those royalists.
Street parties will give us all a chance to say hello to neighbours we usually ignore, and no doubt more than a few glasses will be drunk for Good ’Ol King Chuck before we go back to our usual ways and remember our differences rather than celebrate our similarities.
Both US and UK authorities are at pains to say there is nothing to see here
At least it will divert attention for a while from high inflation, bullying politicians, issues with US banks and a host of other annoying things.
On the subject of banks, the latest problem in the US came with the much larger First Republic Bank becoming the second-largest bank in US history to fail, eventually being snapped up quickly by JP Morgan Chase for $10.6bn (£8.5bn). It is yet another rumbling that discombobulates investors, and whispered echoes of 2008 cause ripples of uncertainty to spread.
The differences are marked because this time it is not the quality of credit but risks exposed by higher interest rates causing the issues. Some say there are more smaller banks that could follow if rates stay high and the problem is exacerbated by the speed with which people can withdraw their cash these days.
Obviously, both US and UK authorities are at pains to say there is nothing to see here and contagion should be limited, but it remains something to watch from the remotest corners of our eyes. It should also serve as a further warning to central banks of the risks of increasing interest rates too far, especially when it appears to have little effect on the current type of inflation.
The government has a cunning new plan, developed by the Professor of Cunning Plans at the Cunning Housing Association. It’s a concept called ‘Help to Buy’
All of this aside, there remains a lot to be cautiously optimistic about. According to research firm GfK, consumer confidence was up to its highest level for a year in April.
Nationwide reports that house prices increased by 0.5% in April after seven consecutive falls, suggesting we could see a “modest recovery” in the housing market. Year on year, they show an overall fall of 2.7%.
Although it seemed as if there were only about three working days in April, since the Easter holidays it has felt like activity is starting to return.
Mortgage availability has increased as well, with Moneyfacts reporting that available residential products are back over the 5,000 mark, the highest since February 2022. According to GetAgent.co.uk, the time it takes to sell a home in England and Wales has fallen by 44 days in the past year.
This is yet another rumbling that discombobulates investors, and whispered echoes of 2008 cause ripples of uncertainty to spread
Meanwhile, Mr Gove is continuing to put pressure on cladding investors to come to the table properly to pay a “comprehensive financial package” or face “severe” consequences.
The whole cladding issue is still a shambles, with problems now being raised by conveyancers and some opting out of acting on these buildings.
The Conveyancing Association has issued some guidelines that are helpful, but it seems to be a problem that has passed from lenders to valuers to conveyancers. Everyone needs to sit in a big room and sort it out.
I mentioned previously that housing was set to become a big part of the next election, and Labour has started by pointing to an English Housing Survey that shows homeownership has fallen from 74% in 2009 to 65% today, a trend that if repeated could see this figure fall another 30% by 2070.
Perhaps now really is the right time for a new type of 100% product from a courageous and innovative lender
With the private rental sector in a state as well, and nowhere near enough social housing, well, you can see the issue. Labour says it will set a target of 70% homeownership, though we don’t know how or by when.
But have no fear, housing fans, the government has a cunning new plan, developed by the Professor of Cunning Plans at the Cunning Housing Association. It’s a concept called ‘Help to Buy’ — just when you thought it was safe to go back into the market.
Someone told me today, and I have not had a chance to check it so please write in and confirm or deny, that the Conservatives have never won an election as incumbents in a period when house prices have been falling. You see the connection?
Since the Easter holidays it has felt like activity is starting to return
Surely there must be better ideas on the supply side. Anyone? Bueller?
It’s all change yet again in the markets as stubborn inflation, among others, continues to push things upwards. Three-month Sonia is up another 20bps to 3.39%, while swap rates have woken up with an uncomfortable start.
Since the previous column:
2-year money is up 0.39% at 4.47%
3-year money is up 0.38% at 4.25%
5-year money is up 0.33% at 3.96%
10-year money is up 0.33% at 3.67%
Now we can really see the cost of the Chuckle Brothers’ mini-Budget. Although two-, three- and five-year money is up around 0.6% since just before that debacle, swaps are still 1.2%–1.4% below where they were at the height of the issues.
In lender land, apart from the latest move from lenders to increase rates (boo), there have been some interesting changes.
All the buzz at the moment is of the much-rumoured return of the 100% mortgage, from Skipton Building Society, although details are not known as yet. It really will be an interesting product and it shows an underlying confidence in the housing market.
To all those saying this is a bad thing, it is highly unlikely to be anything like the products of old, and underwriting and affordability will no doubt be properly assessed.
In a world where the gap between the haves and the have-nots seems to grow ever wider, perhaps now really is the right time for a new type of 100% product from a courageous and innovative lender.
At least the coronation will divert attention from high inflation, bullying politicians, issues with US banks and other annoying things
Nationwide has increased its loan-to-income (LTI) ratio for self-employed borrowers to 4.49 times, while The Nottingham has increased its LTI ratio to 5.5 times for those with a household income of over £75,000. Saffron Building Society has removed its proc fee caps to encourage more large loans. It will lend at 80% LTV to £3m.
In the buy-to-let (BTL) world, BM Solutions has improved its stress rate for like-for-like remortgages and five-year fixes, also removing its £55,000 minimum income stress rate qualification. Meanwhile, Accord is introducing a range of 80% LTV BTL products.
As I write, the coronation is just a few days away. Have a great Bank Holiday Weekend — again.
Hero to Zero
Barclays for hosting a diversity, equity and inclusion event. It was inspiring and shows how many good people there are in our fine industry
HSBC’s latest Emerging Talent event — a brilliant idea and great to see it continue
Continuing improvements from a range of lenders on LTIs and BTL stress tests
Report by Hargreaves Lansdown that shows only 35% of those with a mortgage have enough life cover to protect their family
Another US bank in trouble
Sex-for-rent practices that need to be further cracked down on
— outrageous
What Really Grinds My Gears?
The latest ambulance-chasing practice is reportedly to look at brokers who advised on two-year, rather than five-year, fixes recently, in an astonishing, though actually predictable, jump by certain firms to try to get money after the PPI scandal dried up.
As we all know, in the vast, vast, vast number of cases, advice is given in good faith based on client needs and future plans at time of purchase. If we start using hindsight, especially in light of extraordinary events, to decide we should have done something different, or ignored a client’s preferences, it is a slippery path.
Anyone who foresaw recent events and said with real confidence what would happen next is a much cleverer person than, well, pretty much everyone. Perhaps because we live in a world of social media and instant news, reactions are more urgent and driven by panic. The example of those who paid high penalties to break a fixed rate early and fix at nigh-on 6% shows this.
Also, some advisers suggest publicly that a lot of other advisers do not do this but push a two-year fix against a client’s wishes just so they can churn them again quicker. This is not so.
We must all carefully document our advice process and discussions with clients that lead us to our recommendations. We are a great industry with great people, and we must publicise that.
This article featured in the May 2023 edition of MS.
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