The mortgage market is set for a teeming H2

Bob Hunt

1 August 2024

As we approach the Bank of England's Monetary Policy Committee (MPC) meeting on 1 August, the possibility of a cut in the bank base rate (BBR) is obviously a topic of keen interest for UK mortgage advisers, indeed all market stakeholders.

If the MPC decides to lower the BBR, it could herald significant changes for mortgage product rates in the weeks and months ahead.

We might already be starting to see the early moves in this particular lender play.

Mortgage product rates have already been on a downward trajectory due to a combination of factors. Lenders have been facing a subdued borrower marketplace, exacerbated by the general election period and the onset of the summer holidays.

This has meant a slowdown in borrower activity, with many potential buyers and remortgagors opting to wait and see what the economic and political landscape would look like post-election.

Mortgage lenders playing catch-up
Additionally, I would presume many lenders are behind on their lending targets for the year, a consequence of the broader economic uncertainties that have characterised much of 2024 and, dare we say it, a predilection to price products too highly over the past 4-5 months. 

So, what might be coming over the horizon? Well, reflecting on the recent past, we could potentially see a similar, and hopefully prolonged, period to the one that ushered out 2023 and ushered in 2024 – mortgage lenders aggressively cutting rates, that is.

This was driven by similar lender-focused issues, where a combination of lower-than-expected borrower demand and competitive pressures, combined with a dip in swaps, delivered reduced rates.

The result was a surge in mortgage business, providing a substantial boost for mortgage advisers during that period, but that finished almost as soon as it started.

In recent weeks, we have seen pricing being cut by multiple lenders on an almost daily basis, however Nationwide appears to have gone one step further, cutting rates – albeit just for homemovers – to below 4%.

Others are likely to follow, and this will be a clear signal of the competitive landscape lenders are navigating and the strategies they now need to introduce in order to attract more business.

Advisers, get ready for more demand
These initial rate cuts are likely to be a prelude to broader reductions across the market, especially if the BBR is lowered. Advisers should be prepared for the demand that such rate-cutting almost always engenders, and indeed be on the front foot in terms of communicating with clients – old and new – about what is currently available and why now might be a good idea to get in touch. 

Also, looking ahead to autumn 2024, a significant number of mortgage maturities are anticipated – many billions of pounds worth of remortgages that advisers should be doing all they can to get hold of.

It doesn’t need me to point out that, given the subdued market activity in recent months, this period could be crucial for advisers looking to make up for lost ground.

Also, we have the first anniversary of Consumer Duty, which should serve as a timely reminder for advisers in terms of what could and should be offered to all clients.

The emphasis on delivering quality positive outcomes for clients remains paramount, and adhering to the principles of Consumer Duty is not only a regulatory requirement but also a best practice that can differentiate advisers in a crowded marketplace.

This involves not only securing the best mortgage deals for clients but also addressing their broader financial advice needs holistically, covering all product and service areas, and ensuring they are aware of their options.

Utilising the offering of a distributor like Paradigm in order to access those opportunities and provide a seamless, 360-degree service could make all the difference. This is especially in a year that might have been somewhat underwhelming from a mortgage point of view up until now, but combined with holistic advice, still has the potential to deliver a strong end of 2024, which can drive you into the next 12-month period with a positive pipeline to draw upon.