"We could find the heat returning to the market, particularly if lenders do feel confident enough to bring product rates down again as they did in late 2023/early 2024."
Prior to the start of 2024, I read a lot of forecasts and predictions for this year which essentially could be shortened to a conclusion of, ‘Expect the same again, if not slightly worse’.
Now, I appreciate by the time the end of the year comes, and when the business volume/lending/case tallies are all added up, they may well look very similar to last year, but at present it doesn’t feel like that.
Indeed, 2024 feels very different to last year, and there does appear to be a lot more ‘noise’ around the market, with I suspect, the potential for some big swings in activity as a result of that noise.
In a way, we already saw that in the way January kicked off – bigger levels of interest/demand/activity, with interest rate falls acting as a major catalyst after a period in which rates were running at notable highs.
Now, however, we have clearly seen something of a retrenchment from those early weeks of the year, with many lenders raising rates through February/early March as they seek to move more in line with swap rates which have undoubtedly moved upwards and been very ‘swingy’ in recent weeks.
There’s also been a lot going on in and around the market which has the capacity to shake consumer/borrower confidence, not least the announcement the UK had moved into recession (albeit the latest figures suggest we’re now out of that), plus of course the build-up and delivery of the Budget which presented some very interesting statistics, notably around inflation and potential rate cuts as a result.
We know that inflation is currently 4%, however the OBR believe this will drop further over the coming months and actually reach the Bank of England’s 2% target by the Spring. Which just so happens to be the markets’ best bet in terms of when we might get a first Bank Base Rate (BBR) cut, with Governor, Andrew Bailey, being on the record in suggesting inflation doesn’t need to be at target before they can make a cut.
If/when that rate cut does come, then I suspect we may well see similar activity and demand improving as we did in the early part of 2024, but of course in the meantime we might well see a dampening.
Recent figures from Twenty7Tec showed the total number of mortgage searches on its system, just over the past seven days, were down 18.7% on the same period in February, suggesting ‘the heat in the market was always going to be hard to sustain’.
But, that heat can also be turned up very quickly. What may well stop that is ongoing speculation about whether we’re going to get a May General Election, but that will be over by the end of March when any such announcement will need to be made if Rishi Sunak is really going to take the country to the polls in the Spring.
As mentioned, once that date is out of the way, then it’s almost nailed on that we’ll be waiting until October/November for an election, which may provide a bit more stability for consumers to deal with. Combined with the potential for rate cuts over the period between Spring and Autumn, and we could find the heat returning to the market, particularly if lenders do feel confident enough to bring product rates down again as they did in late 2023/early 2024.
Which leaves us with a little bit of a stasis period, but one which may present further demand, growth and opportunities for advisers, particularly in terms of remortgaging which became very difficult for many existing borrowers last year, but should be easier in terms of affordability in a lower-rate environment.
It also allows advisers to write more remortgage business, rather than having to advise on PTs, which in turn opens up those ancillary sales opportunities that are more prevalent with a remortgage than a PT, such as protection, GI, conveyancing and the like.
So, while it might currently feel very similar to 2023, my own take is that 2024 has already shown the potential to break out of this status quo quite easily and could do so multiple times again, as long as inflation does continue to fall, BBR and swaps follow suit, and this is translated into more competitive product pricing.
We’ve had a taste of this already and let’s hope it can be sustained for longer throughout the rest of 2024, or at least until that General Election is finally called.
