A year ago I was sitting at my laptop writing this same predictions piece and ruminating on the fact that Theresa May had less than a week until the vote on her EU withdrawal agreement, and “it wasn’t looking good”.
Well that turned out to be a bit of an understatement and even I didn’t think in my most pessimistic dreams that very little would have changed one year on in making real progress in removing the uncertainty of Brexit. I am writing this a week before the general election. Will Boris remain in power? Will he have the majority he craves? I’m almost past caring I must confess!
The mortgage market continues to do its thing. As predicted, we have had some players pull out of the mortgage market last year, unable to make sense of tightening interest margins in an overly competitive market. But we’ve seen positive signs also: the market hasn’t stopped, and lending volumes have held up.
Worries at the micro level dwell on the impact of lower remortgage lending activity expected in 2020 because of the higher sales of five-year fixed rates in recent years.
My worry beyond this is focused more on the over 55’s who account for £1.8 trillion of housing wealth. We’ve all made a lot of money out of this sector over the past 30 years or so. And guess what? They are paying off their mortgage loans and exiting the market. Unless we can get our heads around how to continue to make products available to this important sector through retirement lending and inter-generational loans, the stock of loans will only fall. And we will only have ourselves to blame!
It’s interesting to see that the Conservatives have latched onto the old idea of long-term fixed rates and why they will be good for the first-time buyers and hence (presumably) Tory voters. Not a new idea and plenty of enthusiastic strategists have tried to get behind such a plan before with no luck. With a very (very!) flat interest rate yield curve, just maybe this will happen this time.
We might have plenty of downside risks with politics in a turbulent state and Brexit a long way from being done despite what Boris asserts but the country remains in surprisingly good condition. We have all just got on with things. Investors in the UK mortgage market have not run away and we have seen a growing number of funding deals in 2019 supporting new lending and I see no reason why this won’t continue next year.
It’s always tempting to look at all the things going wrong here in the UK. And there have been plenty. But right now Angela Merkel is on the brink of losing her coalition, Macron is far from out of the woods with his Gilets Jaune and looks grumpy sitting next to Trump at the NATO conference, and Trump is… well… Trump!
2020 could be interesting! Time for the UK to stop navel gazing and infighting and get on with things!
This article appears in The Mortgage Finance Gazette here