5 year mortgages will change the industry

How the rush to get low interest rate, fixed term mortgages will eventually leave no impetus in the consumer to remortgage.

By: Larry Jar
Published: 6:15 PM, Mar 26, 2022

Advisor Holding House
Photo by Towfiqu barbhuiya on Unsplash

In the UK we have a well trained pool of mortgage advisors. Over 5,000 firms directly authorised to offer mortgage advice employing 35,000 approved people. A further 14,000 firms are appointed representatives.

There are over 100,000 people holding the mortgage advisor CeMAP in the UK and although not all of them will hold certified advisor status allowing them to advise it's reasonable to assume that there could be around 60,000 active advisors working in the UK.

In a sign of how well we regulate out property market in the UK and the seriousness we take in maintaining a well trained and experienced workforce ready to offer advice to the consumer, this number of advisors compares almost with the 50,000 GPs working in the UK.

For the last few years, we have been sitting with interest rates barely above 0% and while the market has been turbulent work has remained steady. Not least because of the change in attitudes to living, people who have been happy in urban areas have been trying to relocate to the suburbs or further afield to the country.

Home working would have taken years to take off but then the pandemic arrived the country was thrust into remote working, like a child thrown from a boat and told to learn to swim.

Now a whole portion of the country has the confidence to up sticks and work from a back bedroom, miles from civilisation. We also have many companies happy for this to happen, no desk to pay for, no rent, no office heating. The stamp duty breaks also kept hoses moving in the lower end of the spectrum. The government knew we had to keep the market running.

But the consumer knows what is coming down the road, gradual interest rates up to what would have previously been considered normal levels. Numbers like 3% or 4% completely unremarkable in previous generations that now strike the fear of God into borrowers.

The volume of 5-year fixed rates taken now are much higher than before, but I have not yet seen mention of what this will result in for the mortgage industry in a few years. 3 or 4 years from now we could be in a position where a great rump of the property holding public will simply not move house or have no need to reportage to get a better deal when the SVR comes along.

Sitting on a 1.2% rate with 2 years to run in the term. ?Don?t think I?ll bother with moving for a few years yet? they will say.

I predict the property market and advisors are going to have a bad time coming in 2024, 2025 and 2026