Alan Cleary - Managing Director of Precise Mortgages
If 2018 was characterised by one word, it was Brexit. 2019 looks set to be dominated by Britain’s exit (or not) from the European Union too.
But I think we should reclaim the B-word and start focusing on what comes next. So on that basis, my B-word for this year is broker.
At Precise Mortgages, we’ve always supported intermediaries – it’s our view that brokers are fundamental to the success of our business. In large part this boils down to distribution, but it’s not just about that. We strongly believe that advice is key to good lending.
There are a number of reasons for this but paramount is the fact that advice means good borrowing, and if a loan is affordable for the borrower, it stacks up for the lender.
While the Mortgage Market Review made affordability intrinsic in the assessment of a mortgage application, it also provided for the role of advice in that application. And never has this been more important in our view.
Brexit has created a huge amount of uncertainty for government, regulators, businesses and individuals alike. And planning for that uncertainty is nigh on impossible – as everyone keeps saying. But life goes on regardless and it’s here that advisers are so valuable to businesses and individuals.
Good financial advice has always accounted for uncertainty because, let’s face it, no-one can predict the future. It’s why lenders stress-test affordability and why anyone investing their money in property or any other asset is constantly reminded that values can go down as well as up.
The key is that the advice makes reasonable sense given the information available. And for those buying property or remortgaging an existing home or buy-to-let that means being able to afford the repayments for the foreseeable future.
Whatever happens, there’s already been a huge uptick in the number of borrowers choosing to lock in their mortgage rate now. Data from Experian shows that 89% of mortgage shoppers looked at fixed-term deals in December, up from 85% in November and 83% in October. By stark contrast, interest in tracker mortgages accounted for just 6% of searches in the last three months of 2018.
Fixed rates have always been a popular choice for first-time buyers, unused to uncertainty about their financial outgoings. Clearly, the ongoing political drama, together with repeated warnings of a rising base rate, has prompted advisers to recommend that those further up the ladder also create a bit of financial certainty for themselves at a time when so much else is up in the air. This is sensible advice, especially when mortgage rates are so low.
Last year saw margins on residential lending squeezed at all loan-to-values and it’s unlikely that such pressure will continue throughout the next 12 months.
So while 2019 is likely to have some ups and downs, we are expecting it to be one full of opportunity for brokers. They have always thrived in uncertain times because good advice is good advice, no matter what happens politically.