At the end of May, the very trusted figure that is Martin Lewis announced to the Nation that he was
“very concerned” about mortgages, and that they were a “ticking time bomb”.
I’m a fan of Martin Lewis – in fact, I often say to my team “he needs a woman standing beside him,
and one day that’s going to be me!” – but that’s besides the point.
Martin is a trusted voice in the Nation, and generally if he says something, people act on it. He is a
valuable source of information, and he seems to be one of the first to know what’s coming – but I
have to say I was disappointed with this one. I wanted to jump in the TV myself, stand next to him,
and reassure people with kindness and information what this ACTUALLY means for the mortgage
market, and what people REALLY need to know.
So let’s break Martin Lewis’ response down, The Mortgage Mum way…..
Martin said “We’re seeing rates go up, but to get a mortgage you have to pass a credit check and an
affordability check. Now, we are undoubtedly in the midst of a cost of living crisis, so everyone has
less affordability than they did before. Rates are going up and affordability is going down, meaning
more are going to fail affordability checks. That leaves us with a ticking time bomb because most
people are on cheap fixes that are going to expire. Well, the rate is going to be a lot higher, and
they’re likely not to be able to get them, and this is a real problem going forward. You might want to
pay a booking fee to lock in a cheap mortgage. Speak to a mortgage broker for help.”
I have so much to say!
My first point is on affordability. It doesn’t work like Martin has suggested. As brokers know, all
lenders operate a background stress test on their affordability calculations. We have worked with
“worst case scenario” in the back of our affordability checks ever since the introduction of MMR in 2014.
Therefore, the “cost of living crisis” isn’t affecting affordability as much as people might think.
Sure, we need to take it into account when budget planning, but at this point mortgages are not
“harder to get”. In fact, recent changes in criteria have seen affordability increase with some
lenders, which has been a welcome surprise.
As for the ticking time bomb, it is true that £374 billion of fixed rate mortgages that were described
by JP Morgan as “Covid cheap” are due to expire in the next 6 months. And rates will have increased
since they tied in.
BUT, clients will not be left stranded!
The lenders will allow clients to change their rate, regardless of their current situation, and we have
prepared our clients 2 years ago of this happening. Any good broker would have done the same. We
all knew rates were exceptionally low, and this was due to unprecedented times, but we didn’t know
how long this period would last.
These clients would have been talked through what their monthly payments would be if rates
increased (by a lot more than they actually have!) so they were briefed on the potential of an
increase.
Lastly, you can’t “pay a booking fee to get a cheap mortgage”. It doesn’t work like that!
Some mortgages have booking fees, and a cheaper rate. Others have no booking fees and a higher
rate. A broker’s job is to work out the most cost effective mortgage overall taking into account all fees, within the fixed tie in period. This is an FCA requirement and one of the most important parts
of our role.
So Martin – I love you – but let me soften your words next time you broadcast this sort of mortgage
information. The Nation is living with enough fear – in fact I am positively fed up of the
scaremongering we are bombarded with in the media.
The cost of living has gone up, the rates have increased, but the mortgage interest rates on the
whole are still very healthy and competitive, and the property market is buoyant. Perhaps we were
all getting used to a market with rates that were insanely low, but it was never going to be
sustainable for long.
We can’t predict what’s coming next, but we can lessen the fear. We can focus on education and
financial empowerment instead. Arm our clients with knowledge, and allow them to adapt.
That’s what brokers are here for….
So in this case, and this case only, please only listen to Martin Lewis on the last point…. “Speak to a
mortgage broker” – We’ve got you (and there are no ticking bombs about to go off here!).
