"When the most recent 0.25% increase was announced, we had the BBC – of all organisations – suggesting this would mean an increase for fixed-rate mortgages"
In today’s culture, there is a lot of raging against the mainstream media (MSM), normally by fully paid-up members of the tin-foil hat brigade who see conspiracy in every aspect of UK society and believe this is being ignored by the media powers that be.
Setting aside the lunatic fringe, we are – on the whole – pretty fortunate in our space in that we tend to see a measured approach taken towards the mortgage market, although at various ‘crisis points’, namely post-‘Mini Budget’ last year, that sense of realistic perspective can be lost.
There is also a tendency for some in the MSM to lose their senses when the MPC Bank Base Rate (BBR) announcement is made. How can else might you explain why, when the most recent 0.25% increase was announced, we had the BBC – of all organisations – suggesting this would mean an increase for fixed-rate mortgages? Go figure.
It's this type of misinformation, which on the surface might seem somewhat harmless, that has the potential to cause real difficulties. Not least for advisers who then have to spend the next few days explaining the reality of the situation to concerned clients.
As an example, we had what we would genuinely call an experienced professional client contact us post-MPC announcement, worried about the increase to his mortgage rate in light of the 25bps rise. This, despite the fact that a) he’s on a fixed-rate, and b) he’s had multiple mortgages in the past.
While you can understand the sense of ‘excitement’ that builds around the MPC announcement, because of the direction of travel it signals, in our mortgage space the media really need to do better in terms of extrapolating out what that means for borrowers (both new and existing) and what it means in the context of mortgage product rates.
As we know the link between BBR and mortgage rates is often superficial, and it would be better in our view, if there was some time spent on what is far more likely to be moving product rates – namely swaps – than what is really going to impact on a minority of borrowers, namely those on trackers, discounts and SVRs.
You’ll understand this frustration I’m sure because whereas once we might have been talking about swaps (at the most) twice a year in client communications, now we’re probably talking about them twice a day and more.
This is how important they are to what we are able to offer borrowers and the mainstream understanding of that is either sorely lacking, or they simply don’t want to countenance a narrative where BBR is not the all-pervading power in mortgage finance they believe it to be.
Let’s highlight just how big that disconnect is. At the end of the week in which the MPC increased BBR, according to Moneyfacts, the average rates across all fixes fell. And we’ve already seen in the past few days, a number of big, high-street lenders cutting their mortgage product rates, in order to secure the business they need and to match competitors.
Swaps, while they have been a little up and down over the past couple of weeks, are all currently well down on a month ago, and made some of the biggest moves south in the immediate aftermath of the MPC’s announcement. And, yet, you’d be hard pressed to find this information imparted by the BBC, or indeed others covering the news for the masses.
There’s no big revelation behind this, of course. It’s just that the markets believe we are nearer to some sort of interest rate peak, the Budget provided some further stability as did the OBR’s forecasts, and while the recent inflation figures were not particularly helpful, the expectation is that we will start to see some sizeable inflationary falls which will put the brake on rates even further, potentially sending them into reverse towards the end of the year.
However, the big ‘story’ here for borrowers is clearly not in BBR. It is in swaps and it is in lenders' current product pricing. And in that ‘story’ we do find some real positivity to impart in terms of the downward trend on rates – particularly since the ‘Mini Budget' fiasco – but also hopefully through the rest of 2023 and beyond.
If we could only find this news leading our mainstream news channels, we’d probably be able to help more borrowers not put off by what they are hearing and not scared by a rate rise which, for the most part, is not going to impact on them one jot.
