"Predicting and managing expectations is often easier said than done and this is especially the case when it comes to homeowners and potential borrowers who have become accustomed to these low rates."
They say that time is a great healer, which is very true. What’s also true is that time also provides a good platform for people to realise exactly what is happening around them and to adjust their expectations accordingly.
We operated in an extremely low interest rate environment for a long period of time. Any transition out of such an environment was always likely to be a tricky one, even though it was inevitable. However, predicting and managing expectations is often easier said than done and this is especially the case when it comes to homeowners and potential borrowers who have become accustomed to these low rates.
Mortgage advisers have also had to readjust their approach and, in doing so, find themselves having to look that bit further outside the box to find solutions to match clients' personal and financial circumstances which may have shifted over this period.
Q2 2023 feels like a time where many different types of borrowers are realising that interest rates are highly unlikely to get back anywhere close to their previous lows anytime soon, if at all. Meaning we could well have entered a new interest rate norm and for those borrowers who have adopted a wait and see attitude, it’s probably time to act.
There are many caveats to add here, especially in light of recent years and incorporating the capacity to expect the unexpected – where possible. However, as it currently stands, we are operating in a period of relative stability, competition is ramping up and whilst rates are sharpening, we remain unlikely to see any great swings. Stability is a much-welcomed trend, even at this higher interest rate level, and this is also evident from a housing market standpoint.
The latest RICS residential survey points to a continued "weak market backdrop", with indicators on demand, sales, new listings, and house prices all negative. Near-term expectations suggest this pattern will remain in place for a while longer amid a tighter lending environment. However, the twelve-month view on sales volumes has improved in the latest feedback, with respondents anticipating a more stable trend emerging.
This caution was evident in new buyer enquiries, a headline net balance of -29% of contributors reported a fall in demand during March (barely changed from a reading of -30% last month). When disaggregated, the downturn in buyer demand remains widespread across the UK, with virtually all regions and the four nations posting a negative reading in the latest returns.
When commenting on this data, it’s difficult to disagree with Simon Rubinsohn, RICS chief economist when he suggested that caution towards the sales market continues to be reflected in both the headline price and activity indicators. He added that while deals are being done, a theme coming through in the anecdotal remarks is the need for vendors to recognise the shift in market dynamics. Significantly, he also outlined a sense that the medium-term outlook is looking a little more settled, helped by the perception that the interest rate cycle may be near the peak.
The intermediary market will continue to play a major role in both delivering a host of appropriate solutions and in having to undergo some difficult conversations with many clients in terms of their options and expectations. And it’s those advisers who get this balance right who will maintain a successful approach and demonstrate why the value of mortgage advice has arguably never been higher.
