Have we reached a tipping point?

Originally published by Best Advice

As the curtains closed on a hugely successful Olympic Games in Paris, Tom Cruise did Tom Cruise things, and everyone tried to forget the quality of the water in the Seine – after all, who are we to talk on this subject – there was I hope a sense of pride in the performances of all GB and NI competitors.

Indeed, I think expectations were surpassed, with more medals brought home than anticipated and a reminder of the good things this country can produce, particularly when compared to the horrendous and disgusting scenes we saw on some of our streets during the Games itself.

Triumphs across the Channel were many and always thrilling, and after a period of time when I feel this country has not always covered itself in glory, or had much to shout about, this might well be deemed in the future, a tipping point. I certainly hope so.

August also felt like a financial tipping point had been reached, with the announcement by the Bank of England that its Monetary Policy Committee (MPC) had opted for a Bank Base Rate (BBR) cut, voting 5-4 in favour of taking it down from 5.25% to 5%.

I’m not suggesting this decision created a frisson of excitement akin to watching our athletes secure their medals in Paris, but it was certainly far more optimistic for our sector than anything we have seen in more recent times, and again it is hoped this is merely the start.

Going on the B of the Bang as Linford Christie famously said, and if the UK economy, but specially the UK mortgage market and the buy-to-let sector, can continue in this vein in the months and years to come, we will have much more to be positive about. It is certainly required again after a subdued period.

This encouraging economic news has dovetailed of course with a drop in swap rates. As I write they are 20-30 basis points below where they were last month, and around 140-150 basis points below where they were at this time last year.

This has meant a plethora of rate cuts have been made possible, including from Fleet, and it moves a number of our fixed-rate products below 5%, where affordability is always much easier to achieve, opening up a wider variety of options, particularly for those who have buy-to-let mortgages coming up for maturity. And we know there are a lot of these over the months ahead.

Perhaps of even more significance, as will be lost on no one, rates are now some way below where they were approximately two years ago, and those remortgaging borrowers who are coming up for a two-year maturity after last remortgaging in Autumn 2022 will I hope be able to access much more competitive product rates now than were available in the immediate aftermath of the disastrous ‘Mini Budget’.

That should certainly be another positive for mortgage advisers, particularly those looking after landlord borrowers who two years ago may have had very slim product pickings to choose from, but who I hope will find a much more sympathetic market product place now.

Interestingly, there may be a key decision to be made for all borrowers right now, particularly if it is felt we might just be at the start of rate drops, rather than anywhere near the end.

In this environment, might we continue to see a resurgence in tracker take-up, which might be particularly enticing for landlord borrowers who envisage multiple cuts to rates specifically through 2025?

No-one will surely be thinking we are back on the road to the ultra-low rates we saw for much of the last decade and into the early 2020s, but it’s not impossible we’ll see BBR down to 4% over the course of the next 12 months – potentially even lower.

Therefore taking a tracker now, with no ERC of course, does give landlords some degree of flexibility over that time period if they can afford the current higher costs that come with them now.

Overall it does feel like we now have a more positive market picture to be able to present to borrowers and to move on from. Lower rates clearly play a huge part here, as does lender appetite, and a willingness to offer products and criteria that borrowers (and their advisers) want and need. It is just the start but it feels a little like renewal – there are definitely no medals to be handed out yet but at least we might all feel like we have a much greater chance of winning.