Hi everyone, and welcome to the last Newsletter for 2023! I am not quite sure where the year went, but once again it’s been quite a ride again in the mortgage market. We have had Consumer Duty land, the Mortgage Charter introduced at break neck speed, a cost of living crisis firmly embed itself into the market (and all that comes with it for advisers, Lenders and customers), announcements on rental reform, delays on introducing expected legislation for landlords leading to mass uncertainty, interest rates potentially having peaked and Lenders having to deal with rates bouncing up, down and even sideways, criteria, affordability and operational issues, at a time when for many their values and volumes are dropping. However, as I write this, there does seem to be - for the first time in a while - a sense that a sense of calm has settled over the market, and the sudden movements in rates have slowed down. Since we came out of the last financial crisis, the measures taken by governments to protect the financial system created a unique environment for Lenders and customers. But where we are now, and where we are going in 2024, is I think going to change the mortgage market. Inflationary pressures have forced banks to raise rates and halt quantitative easing. One could argue that the tools which in a way suppressed financial markets were withdrawn. Whilst rising interest rates were disruptive, and will probably continue to be, there have also been many changes as we emerge from the last 15 years. The move away from an environment of low interest rates, low inflation, strong liquidity, and ‘loose’ credit conditions has been replaced, and I think 2024 will see this new market exist as it is now. Many commentators are saying the Bank of England is not expected to increase rates again this year, the latest inflation figures and most importantly core inflation have started to consistently fall and this is expected to continue. It may well be that we are at the top of the interest rate cycle, indeed Saville’s are now saying “the UK’s housing market is past “peak pain” with average house prices forecast to fall by 3% next year as affordability pressures ease. It expects that the Bank of England base rate will stand at 4.75% by the end of next year, which will lead a sliding housing market “to bottom out in mid-2024,” in its five-year house price forecast”. It does seem from talking to Lenders about the number of applications coming through that there is a purchase market available and open, which bodes well if rates do stabilise. Richard Howes Director of Mortgages Paradigm Mortgage Market Update 04 WINTER MORTGAGE NEWSLETTER
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