It's time for mortgage advisers to adapt to current interest rate environment, says head
The housing market is experiencing a new normal interest rate environment that could result in less volatility for both brokers and consumers, according to Paul Kane (pictured), new head of intermediary distribution at MPowered Mortgages.
Kane, who took over the role last month, said broker sentiment had changed in the market after an initial fear that the base rate could go as high as 6%.
Last week, the Bank of England raised interest rates by half a percentage point to 3.5%. It was the ninth rate hike in a row and the highest level in 14 years, prompting concerns about the long-term impact on borrowers.
However, Kane said the mood in the sector had “calmed down” since then.
“Some analysts are expecting 4% or 4.5% (mortgage interest rates). In stark comparison to where we were only a few weeks ago, where the Press was talking about base rate going up to 6%, what we’re seeing is potentially a new normal interest rate environment, and hopefully less volatility so that consumers will have a better idea of what their mortgage costs are going to be going forward. And brokers won’t have to deal with that volatility that they experienced some months ago,” Kane said.
Nonetheless, he conceded that the sector was facing “some headwinds” and a new “price environment” following a decade of low interest rates.
He said: “That’s causing some challenges for customers that are renewing their rates. But now is the time for brokers to really adapt to the new rate environment and fully understand what their lenders are offering in terms of retention products.
“They should also be very close to customers and give them suitable advice, because that’s really important. I was out with the head of a broker firm a couple of weeks ago and he’s got about a dozen advisors, none of which had ever sold a tracker or discounted rate in their career.”
Into a new space
In March, fintech lender MPowered Mortgages announced that it was entering the prime residential mortgage space via limited distribution, just as the cost-of-living crisis was beginning to bite, with more than 80% of adults reporting an increase in their day-to-day costs, according to data from the Office for National Statistics (ONS).
Kane, however, said he was optimistic about prospects going into the new year, saying the lender’s entry into the residential market had been “incredibly successful”.
He said: “We’ve learned an awful lot and we’ve made lots of changes. We started at 75% LTV, and we just recently moved to 85%. But in terms of the mortgages process, we’ve done over 500 million, so we’ve made a really good start. We also built on broker distribution, and we’re up to around about 7,000 brokers that can now access us.”
Kane, who has more than 30 years’ experience in the mortgage sector, spent most of his career at NatWest before joining the burgeoning startup in February as a corporate account manager, just before the challenger bank’s move from BTL to residential mortgages, which he said had been a “natural progression” for the company.
“We always had the ambition to move into residential. But the area of the residential market we wanted to play in is very much dominated by the top six lenders in the UK. They typically do about 80% of all residential lending, and we wanted to build a proposition that would compete with them on price, service and technology.”
Asked to give his forecast for next year, he said: “We’re hearing anything from prices plummeting by 10% to affordability being even more of a problem for borrowers.
“We think there will be between a 5% and 10% house price decrease, mindful that we were coming off record highs and a number of years of double-digit growth. It’s actually not a bad position to be in from where we were two or three years ago, so we’re still in potentially positive territory.”
