Fiona Nicolson reports on the aftermath of the UK government’s September mini-Budget
Autumn 2022 has been a stormy time for the mortgage market, creating tough challenges for brokers and their clients.
The recent turbulence followed the government’s ‘fiscal event’ in September, otherwise known as the mini-Budget.
In the aftermath of the Budget announcements about tax cuts and spending measures, the pound tumbled to an all-time low. Mortgage rates leapt to 6% and the mortgage market lost nearly
1,000 (935) mortgage products overnight. According to data firm Moneyfacts, this represented the highest daily fall in the company’s records.
The bad news kept on coming: the Halifax house price index for September 2022 reported that average house prices across the UK had experienced a fall of 0.1% in September, the second drop seen in the past three months.
Some predict things could get worse. Andrew Wishart, senior property economist at Capital Economics, says: “It is widely accepted that the jump in mortgage rates from 1.5% last autumn to 6% means that a significant fall in house prices is now inevitable.”
He forecasts that prices could fall by about 12% in nominal terms.
Commenting on potential developments, Phil Anderson, director at Phil Anderson Financial Services, says: “It will be interesting to see how things evolve. If wages don’t keep pace with inflation, I think we could be in a lot of trouble. I can see mortgage arrears increasing and we may well see some property prices come down.”
But Anderson does not believe that a serious slump in the market is inevitable. “There is still a shortage of property in the UK and that should stave off a large housing crash,” he adds.
Robert Sinclair, chief executive at the Association of Mortgage Intermediaries, also does not anticipate severe problems in the near future. “It is far too early to predict falls in house prices,” he says.
“As they continued to defy gravity during the pandemic, any correction is likely to only remove growth seen in the last two years.”
If wages don’t keep pace with inflation, I think we could be in a lot of trouble. I can see mortgage arrears increasing and we may well see some property prices come down
While there are some signs of the market steadying, it has been a challenging time for homeowners and property purchasers. It has been a particularly busy time for mortgage brokers too, as they seek to both support and signpost worried clients to sources of assistance.
Anderson says: “At present we are directing some clients to the Citizens Advice Bureau, which I know is seeing a huge upturn in the number of mortgage-related questions it is receiving.”
However, despite the wave of mortgage concerns and queries, there are still options for those affected. Sinclair says: “There has been a huge increase in clients looking for clarification. The situation is undoubtedly difficult but there should be no panic.
“For those with existing offers looking to complete, brokers should be able to provide comfort that provided the transaction can complete before the expiry of the offer, then it stands as offered.
“Good brokers are reviewing their pipeline of cases and working with clients and conveyancers to ensure all parties are aware of the key dates and can meet the deadlines.”
He adds: “For those consumers who think they are facing a cost-of-living issue, the recommendation must be to talk to their lender early and make plans. This could include conversion to interest-only mortgages, term extensions or a payment holiday if that is the only solution. Possession will be the very final option.”
Lea Karasavvas, managing director of Prolific Mortgage Finance, says speed can be of the essence when helping clients navigate current changing circumstances: “The best way we can assist clients is by simply offering the best rates that are available to them at the earliest possible opportunity.
“We can lock these rates in and then continue to track the markets so if something more appealing comes along at any point before completion, we will then notify our clients and look to activate a change.
“We are advising clients that we are working in an extremely volatile climate where lenders are withdrawing and repricing quicker than they have done for some time. Therefore, it is important to have everything ready at the earliest convenience to secure rates at the quickest possible opportunity.”
Karasavvas continues: “We are also advising that at present, due to the fact that many lenders have removed products, the market is lacking competition, which in turn means that rates are running high. Once pricing is easier and more rates are returned to the market in the coming weeks, there is a possibility that the competition could see rates fall.
“Right now, it is impossible to predict where rates are going to go but we can ensure that the rates our clients draw down on will be the best that were available to them at the time they complete. That is all we can do at present in such a volatile environment.”
Fiona Nicolson is a freelance journalist