Brokerage director on advisers' key role amid rates fluctuation
Mortgage brokers are likely showing their worth, keeping clients up to speed with ‘frazzling’ changes in rates, as competition hots up again between lenders. That’s according to David Hollingworth (pictured), associate director of brokerage L&C Mortgages, who identifies a persistent uncertainty in the market and ‘knee jerk’ responses from lenders.
Activity has ramped up in recent days, with Santander becoming the first major lender this year to announce rates below 4% - two- and five-year fixed deals at 3.99% for borrowers with a 60% LTV, available for both home purchases and remortgages. Barclays has responded in kind - its green home five-year fixed mortgage for residential purchases, will decrease by 14 basis points (bps) to 3.99%, from today.
“I think brokers will be well versed in keeping on top of all the changes in the market, as each fluctuation in sentiment can send rates in one direction or the other,” Hollingworth told Mortgage Introducer. “This feels like it’s been an ever present in recent years and can be frazzling trying to keep up, but brokers will likely have only proved their worth once again by keeping their customers well informed and abreast of the change and what it could mean for them. We certainly saw that when rates were falling last year and we managed to save even more for customers by making sure they switched to lower rates. It’s more work but something that customers wouldn’t be able to take advantage of without their adviser.”
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What’s the impact on mortgage borrowers?
Hollingworth continued: “From a borrower’s viewpoint it must be confusing as they’re constantly being told that interest rates are on the way down, only to be confronted with mortgage rates nudging up and then easing back. There’s clearly still a good sized portion of uncertainty in the market that is driving this and each piece of data seems to drive something of a knee jerk response in funding rates. On the more positive side there hasn’t been anything like the kind of volatility that borrower and brokers suffered in recent years.”
Stepping into the latest battle among lenders is NatWest which has adjusted rates across various mortgage products, with reductions of up to 36bps on remortgages and up to 16bps on purchases, including high-value and green mortgages. Halifax Intermediaries is also introducing 1.5-year fixed remortgage products, while increasing tracker rates by up to 0.18%. The activity follows the decision by the Bank of England’s Monetary Policy Committee a week ago to lower the base rate by 0.25% to 4.5%. “The cut in base rate last week will help to underline to customers that interest rates really are heading down,” said Hollingworth. “Some of those cuts will be priced in so it may not result in plummeting mortgage rates but should allow for some good sparring between lenders as the year progresses. Whenever there’s a few changes of rate in a positive, downward trajectory it’s easy to call it a rate war. In fact, lenders are pricing as competitively as they can so the rate war’s pretty much an ongoing battle. That will equally apply when rates edge up and we saw some big lenders holding their pricing steady as long as they could, before relenting to the higher swaps and the market shifting around them.”
Among the big names taking decisive action are TSB, which has reintroduced its five-year fixed First-Time Buyer and Home Mover products at 90-95% LTV, with rates starting at 5.39%. Other reductions include a decrease of up to 10bps on two-year fixed first-time buyer mortgages. But where does this leave smaller lenders – is there room for them to flex their muscles too? “The lowest rates are often now dominated by the major lenders and there’s so little meat on the rates that it gets harder for the next tiers to compete directly,” observed Hollingworth. “However, that has seen many look at where they can carve out a niche. Some have been able to find pockets at higher LTV where they can attract business, whilst others will look at innovating in criteria or product to grow their presence. We want a market where there are alternatives so it’s good news for brokers and their customers if small to medium size lenders can continue to differentiate. It will also help to ensure that the competition is as strong for those with smaller deposits and those in need of a more flexible approach as it is for those fishing for the very lowest rates.”
Lender appetite is strong, in Hollingworth’s view and the year seems to be shaping up for a continuing ebb and flow in terms of rate trends. “We’re hearing lots of ambition to see aggressive growth this year,” he noted. “That won’t be easy to achieve in a fiercely competitive market but should ensure that borrowers will see the sharp pricing continue, even if there are some further ups and downs along the way.”
