Pre- and post-mini Budget remortgagors need guidance in transformed market

The next few months look like being very interesting for all manner of reasons, not just in terms of rates, activity, and the like, but certainly in terms of what happened two years ago, how that influences remortgage activity, and what market borrowers are stepping into.

Also, throw into the mix a first – and likely to be highly significant – Budget announcement in a new Parliament under a new Chancellor and government taking place on the 30 October, and Monetary Policy Committee (MPC) meetings being held in September, November and December, and you have plenty of ‘events’ that could certainly move the economy dial, and our market in particular.

On the subject of MPC meetings and votes, some commentators are already hammering the nails in the coffin of a potential further September bank base rate (BBR) cut following the news that inflation rose last month to 2.2%, with an expectation that it will remain about the 2% target for the rest of the year. 

Still room for mortgage rates to fall 
However, there are two points to make with regard to this. Historically, rates have been cut without inflation being at, or below, target, and secondly, mortgage product rates move on a whole number of unrelated factors as we see every single day of every single week. In other words, we don’t necessarily need further BBR cuts to see product rates continue to track lower.

Yes, of course, BBR cuts and swap rate movements downwards tend to precede further product rate cuts. However, they are not wholly determinant of what lenders are willing to do, particularly if 2024 has been a year of subdued activity resulting in the need to be more competitive in order to bring in more business.

Anyway, I’m certainly not convinced we have seen the last of any BBR cuts between now and the end of 2024. In fact, part of me would be surprised if we didn’t see a further cut. And, even if we don’t, product rates – particularly across higher loan to values (LTVs) – appear to have some way left to dip.

Domino undercutting of product pricing has already been a theme recently, not just in those headline-grabbing, low 60% LTV five-year fixed rate spaces occupied by the bigger lenders, but also across almost all mortgage product niches. But they may go further if lenders feel the need to secure business higher up the LTV risk curve. 

That is clearly important, as mentioned, given the months that follow.

Still adjusting to mortgage costs 
MPowered Mortgages’ recent research highlighted those borrowers who are coming to the end of their deals after taking out two-year fixes in August 2022, just before the price hikes and product pulls that followed the mini Budget. 

Of course, it’s not just this borrower cohort who are likely to be finding product rates much higher now; I would suspect every single borrower coming to the end of their deal who took out a three-year deal in 2021 or a five-year deal in 2019 could be facing the same increase in monthly mortgage costs. 

That will certainly be a job for advisers in terms of keeping those increased monthly repayments down. 

However, what about those borrowers who were unfortunately having to take out mortgages post-mini Budget?

Products available now tend to look much more competitive and cheaper than they did back then, potentially providing a monthly saving, depending on what they opted for, back in autumn 2022, and even if they took a longer deal back then, the move in product rates recently might make it worth their while, at the very least, to consider what they could get now. 

Figuring out refinance options 
Even with an early repayment charge (ERC) to pay, it’s still worth crunching the numbers, not least because as you will know, the product environment now – or indeed through the months ahead – is likely to be very different to the limited options and higher rates that were available back then. 

It will not be worth the charge or the move for all borrowers, but for some, it could be worth it, and as we know, time spent with a client isn’t just about the mortgage conversation but could highlight other products and services’ wants and needs, which have shifted over the past couple of years.

A lot of change can happen over that period, and it will be worth touching base with every client you saw during that time. 

Overall, therefore, in terms of remortgage opportunities, we know that a significant amount of business is coming up for maturity between now and the end of the year.

We might split them into pre- and post-mini Budget activity, but the aim will be the same: to keep repayments down and to make contact to ascertain where lives are at, where priorities might have shifted, and where your advice services are needed right now, be it the mortgage or in any other ancillary needs.

As always, take the opportunity to make client contact – it is unlikely not to be in both your and the client’s best interests.