Home » Market Watch: Don’t bother with predictions for 2023

Market Watch: Don’t bother with predictions for 2023

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Andrew MontlakeHappy New Year!

Yes, I know it is February already, but this is the first column of the year and that seems to be the best and most polite way to begin.

So, another brand-new, shining year is upon us. Although there is the usual flow of optimism ahead of new adventures and possibilities, given the past few years there is also a good deal of trepidation as to what could happen next.

The discussion should not be about what the rate is, but whether it is affordable and will get you the property you want right now

In fact, I am sure we are all hoping that 2023 will be remembered as that most beautiful thing: a calm and even dull year, where we could all get on with our jobs against a backdrop of boring politics and improvement, safe in the knowledge that some outside event we could not control would not come along to gobble us all up again in a fiendish frenzy of foolishness.

Although the latest incarnation of the Conservative government still seems to be suffering from what one pundit has called “long-Johnson” syndrome as a range of unsavoury practices comes to light, we hope there is no further disruption with Rishi Sunak forced to go to the country earlier than planned.

Buffoonery

Meanwhile, there has been the usual barrage of New Year’s predictions — which these days is a combination of over-analysis, finger-in-the-air twirling and crystal-ball gazing; a buffoonery attempted only by the brave, the stupid or those with a particular reason for doing so.

This year, as an example, I have seen house prices predicted to both fall by over 10% on one side and rise by 8% on the other. To join the fray, I can confidently predict they will fall by between 3% and 5% this year, and Bank base rate will peak at 4%. OK, maybe 4.25%!

My plea to lenders is to cut rates in earnest; I believe you can

It was surprising on a couple of levels to read a report from Rightmove that house prices had rebounded in January. First, because we must reiterate that this is not house prices but ‘asking prices’, and there is a huge difference; second, because we were barely midway through January.

What this data shows, however, is a snapshot in time, and there is no denying the market has started the year more brightly than many expected.

There is usually a bounce in activity at this time of year because many potential buyers have had time to think during the Christmas break and now vow to have moved by next Christmas; or, sadly, vow to not have to spend another Christmas together.

The real test will be whether this initial bounce of activity is sustained and translates into actual sales.

So much depends not on the next moves by the Bank of England but on the rhetoric that accompanies them

What we can optimistically gauge from this data, however, is that demand for property is still alive and well, and that higher interest rates, which are easing daily, are no longer putting off people from looking, especially those who are comparing mortgage payments to ever-increasing rental payments.

I expect this to continue and the market to again confound doom-mongers predicting some kind of crash.

Good year to buy

I also think 2023 may very much be seen as a good year to buy, with prices easing a touch before rising again in the next few years. My mantra has always been that the best time for anyone to buy is when it suits them to, and when it is affordable to do so. Holding off, on the idea that it may be cheaper next month or year, rarely pans out, and often a chance is missed.

In fact, the discussion should not be about what the rate is, but whether it is affordable and will get you the property you want right now. We should stop trying to play the market.

Industry body Propertymark is calling for the reintroduction of mortgage interest relief for landlords

Behavioural economics and the concept of anchoring are interesting here, and people generally adapt very quickly. Most now accept they will not see rates at 1% or 2% and are grateful they will not see rates of 6% or 7%, so this new middle ground starts to feel very reasonable.

There is already talk among journalists that the coming weeks could see the return of a mortgage ‘price war’. Of course, we all love a good price war, but times are a little bit different these days.

So much depends not on the next moves by the Bank of England but on the rhetoric that accompanies them. I do not see a need to move any further right now.

I have seen house prices predicted to both fall by over 10% on one side and rise by 8% on the other

My plea to lenders is to cut rates in earnest; I believe you can. The only thing holding back a busier-than-expected market is the belief that rates will get better, and we all need some more activity after the disastrous mini-Budget stopped everything in its tracks.

Our first look at the markets this year shows that three-month Sonia has dipped a touch to 3.02%, while swap rates continue to fall like Tory Cabinet members.

Since the previous column:

2-year money is down 0.29% at 3.98%

3-year money is down 0.32% at 3.77%

5-year money is down 0.24% at 3.55%

10-year money is up 0.01% at 3.34%

As mentioned, there has been a plethora of changes from lenders and product rates continue to tick down.

Well done to Virgin Money for what looks like the first fixed rate, its 10-year fix, to be priced under 4%. Santander has come close with its five-year fix and it won’t be long until we see a few more products once again starting with a 3. Well done also, Santander, for enabling brokers to view our clients’ valuation reports in their tracking system.

I am sure we are all hoping that 2023 will be remembered as that most beautiful thing: a calm and even dull year

It was pleasing to see good news around cladding, finally, as six of the biggest lenders have agreed to consider mortgage applications on properties with potentially problematic external cladding. As always, each lender will approach this differently and reserve the right to consider each case on its own merits, and could ask for more information; so it’s not an absolute given but it is expected that many leaseholders who could not sell or remortgage will now be able to do so.

The force of nature that is Michael Gove continues to endear himself to builders with his determination to actually do something, which should be lauded, by giving developers six weeks to sign legal agreements to commit them to pay to repair unsafe buildings.

Mortgage interest relief

The buy-to-let market continues to improve, albeit slowly, and it was interesting to read that industry body Propertymark was calling for the reintroduction of mortgage interest relief for landlords.

While the reasons may well have been right for the change back in 2016, we are in a different market now and there is a worry that the private rental sector will continue to regress and put further pressure on a creaking system. Reinstating the relief would potentially help to lower rents too.

There is no denying the market has started the year more brightly than many expected

This is also the year of the Consumer Duty, and no doubt there is much wailing and gnashing of teeth as both lenders and distributors try to make sense of their own plans and way of dealing with meeting the new regime. No doubt there will be much more to come on this.

I guess the biggest lesson we can take into this year is that there is no point worrying about what we can’t control. I know it is easier said than done, as my lack of sleep will attest, but we can control only our own choices and decisions at any one time. We can’t control everything.

Whatever happens this year, I wish you all the very best for 2023 and beyond.

Hero to Zero

  • As is tradition, the prospect of 2023 – good luck, we are all counting on you
  • Virgin Money for the first sub-4% fixed rate, and Santander for its own rate and other changes
  • Lenders’ changes on cladding policy – a step in the right direction
  • Green mortgages still have a way to go to be really ‘green’ and meaningful
  • Consumer Duty timescale – so much to do in so little time
  • ‘That’ appalling advert for protection featuring a high-profile murderer – the company doesn’t deserve mentioning

What Really Grinds My Gears?

There has been much early-year angst among brokers about comments by a well-known commentator — in fact, two of them — that borrowers should deal only with large broker firms.

There are a couple of things here. First, those in the public eye have a right to their opinions, which they are paid to opine to the masses. What we must get better at as an industry is showing and proving that things are different from how they may be perceived.

Keep doing what you do and we will all work to change perceptions

We know there is a fabulous collection of small firms, one-person bands and the like who offer an incredible service, often much better than that of larger counterparts. Some of the best brokers I have met have come from both small and large firms. The opposite is also true for both! We all know size is not everything.

Luckily, we now have the tools to change this incorrect perception. Social media, plus Google, Trustpilot and tools such as Newspage, give small-business owners a voice like never before.

Small local firms are a lifeblood, often a cradle of diversity, customer service and local community support. Keep doing what you do and we will all work to change perceptions.

Andrew Montlake is managing director of Coreco

This article featured in the February 2023 edition of MS.

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Finopulse

Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by Finopulse.
Publisher: Andrew Montlake

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