Rate war

There has never been a better time in the last 15 years to invest in property. Those who have cash balances and are looking for investment opportunities must grab the current market opportunities with both hands because, in our view, this period of uncertainty and depressed house prices will not last much beyond 2024. Yes, you will be paying more in terms of interest in the short term, but one can acquire the same asset for 10-15, sometimes 20% below what one would have paid just a year ago. House prices are a direct function of the ease of lending and market liquidity. So, of course, as the clouds of high-interest rates dissipate and give way to sunny, breezier rates in 2024 (which we expect to begin emerging around Q2 2024), the demand for residential properties will only increase. Remember, we live in a society with an acute housing shortage, where demand will continue to outstrip supply while new house building continues to lag. This is clearly a once in a generation opportunity.

The fairly constant reduction in mortgage rates is certainly driving consumer confidence and we for one feel that enquiries and revenue will increase in 2024.

There will naturally be a floor for these reductions and I don't think we've quite found it yet, and there will also likely be a drop in lender service levels as they become busier with business flowing in.

The estate agents we work with are hoping the reducing rates also drives activity in the housing market, and many are more hopeful for 2024 than they were 2-3 months ago.

As a firm we continue to review pipeline cases to ensure clients benefit from reducing rates, this is our commitment to our clients.

It definitely feels like the worst is behind us, and confidence is slowly returning to the housing market. I expect a noticeable uptick in transaction levels next year, provided there are no further inflation shocks. As house prices drift lower, I expect first-time buyers to return, particularly if most rates fall below 4.5 percent.

Lenders are reactive to the rate changes and as long as swap rates stay low, they can all edge down to minimal profit on each product. When that profit goes below a margin, they will add fees, be it 2-3-4-5-6-7%, the less that they make on interest, the more they need to charge on fees. With each price drop comes a new challenge. Do we re-fix for our clients or stick? Some lenders are charging up to £499 for a product swap after application and its not worth it then. If its free though, it can help clients out and should be assessed.

Lenders need to cut their margins to attract new business, whether that new business be First Time Buyers, Remortgages or retaining their existing clients.
It feels via new enquiries that the confidence is starting to return, and many first-time buyers and home movers are contacting us requesting advice about moving in 2024, this is due to interest rates reducing and mortgage payments becoming more affordable and secondly as prices have levelled out during the latter part of 2023.
We are not wanting to see property prices sharply increase as in previous years, some stability would be good for 2024.

Oddly, I'm not 100% sure that lower rates are what the market needs, as constantly lowering rates have a similar impact to rising rates on people looking to move, it makes them think "I'll wait and see what happens next..." It is a period of relative calm that the markets need to recover, people need to feel that making a big financial decision today isn't going to mean they miss out on an even better deal tomorrow.

When mortgage rates are in general above 5% with the odd sub 5% deal available, you can hardly call this a rate war. Bring back the rate wars of 3 years ago when a rate war meant a sub 1% interest rate !

We welcome stability in the market, however, the war on rates and product fees is a must to keep the market competitive. As 70% of our clients are investor-led, they are reliant on the lowest rate to help manage cash flow within the business model. This has a direct impact on the rental market. No cash flow, no landlords, it is that simple in most cases.

There is a lot of negative press in the investor space around the years of looking after good renters (and a few lazy landlords not increasing rents for seriously long periods). These landlords have rested on their lorries and now feel the pinch. Getting a market rent increase when you may be a few hundred out of bed is challenging and can be considered high risk when we feel like there are increases all over.

Banks are in business like us all and we should be mindful a return of 5% is low in many commercial-minded businesses - so bring on the war, keep innovating products but please sort out the horrendous fees we are seeing!