As autumn approaches, many of us are lamenting the end of a very rainy summer.
But when we look to the housing market, there are reasons to be cheerful - with
inflation rates forecasted to come down and activity predicted to increase
towards the end of the year.
These trends formed the foundation of our discussion in our latest market-
focused webinar, in which I was joined by Alex Maddox, our Capital Markets
Director, Andrew Montlake, Managing Director, Coreco, Frances Cassidy our Head
of Mortgage Intermediary Partnerships, and William Hobbs, Managing Director
and Chief Investment Officer in Private Bank & Wealth Management at Barclays.
Market Update - an economist’s view
To kick things off, Will updated us on the economic trends set to shape the future
direction of our world. He explained that the global economy, like the UK economy,
is still shaking off the aftereffects of COVID and Russia’s invasion of Ukraine.
Fortunately, it does look like inflationary pressures are starting to peak - and already
have in some places - and this should hopefully signal a peak in interest rates. The
US economy is motoring ahead, and that’s important for the global economy - the
UK included - because it sets the tone for the rest of the world’s capital markets.
Meanwhile, economic activity in Europe has been slowing quite sharply. And China,
which has seen enormous economic growth over the past few decades, is having
its own domestic problems, with the popping of its epochal property bubble.
China poured more concrete into the ground during three years during the 2010s
than the US managed in the entire 20th century – but now that its urbanisation is
complete, it needs to find new growth engines. China’s role in the global economy,
including its demand for commodities, is about to change significantly, and there
will be reverberations globally.
In the UK, Brexit continues to cause uncertainty, which is slowing down the
economy. But our world-envied institutions - from our strong rule of law to our
embedded economic structures - should mean that the UK remains attractive for
investment once the dust has settled following Brexit renegotiations. Areas such as
biotech and financial services will give us a strong competitive advantage – and the
rise of AI represents a chance to catapult ourselves into the next era after a period
of slow growth in productivity.
Will closed his discussion on a positive note by suggesting that the UK will probably
avoid a recession, and by advising brokers to steer clear of doomsday scenarios
and focus on the factors within their control.
What happens at the MPC?
The Bank of England’s Monetary Policy Committee (MPC) has made more interest
rate changes in the past six months than in the past six years. So, in our next
session, Alex sat down with Frances to explain how the MPC makes decisions, and
what impact it will have on the housing market over the coming months.
To do this, they use tools such as quantitative easing, which involves printing
money and adding liquidity to the banking system, and quantitative tightening,
which involves reducing the money supply and withdrawing liquidity from the
financial system. The primary day-to-day focus, however, is on the Bank of England
base rate, which is the rate at which banks and building societies can deposit their
cash overnight with the central bank. Large UK banks hold substantial overnight
deposits with the Bank of England, and the rates they charge investors on lending
or the rates they offer investors on savings are closely linked to the central bank’s
rate. This can have a significant impact on both consumers and businesses by
encouraging more spending or less, depending on the rate’s direction.
The current environment is highly challenging for the MPC. These are uncertain
times, marked by significant events such as the global financial crisis, pandemics,
and geopolitical conflicts like the war in Ukraine. One critical challenge is the
transmission effect — how quickly changes in the central bank’s rates impact
consumers and businesses. It can vary depending on factors like the types of
mortgages people have, whether they’re on fixed or floating rates, or if they own
their homes outright. Another challenge is the risk of overshooting — raising rates
too much can lead to negative consequences such as defaults on debts, impacting
both consumers and businesses. Striking the right balance is crucial.
Inflation also plays an important role. Wage inflation is key, because higher wages
enable consumers to afford larger mortgages. Price inflation, on the other hand,
increases living expenses, negatively impacting mortgage affordability. Central
bank rates and forecasts influence mortgage rates, further affecting affordability –
and long-term trends show a strong correlation between house price inflation and
Given that capital markets are sensitive to economic data releases, impacting
pricing quickly, it’s important that advisors keep their customers informed. They can
do this by sharing insights with their customers from the central bank’s forecasts,
which offer a sense of the direction of interest rates, or by monitoring swap rates,
which indicate the market’s expectations for average central bank rates over
How can the industry influence the future?
Andrew joined my colleague Adam next to discuss today’s mortgage environment.
Brokers have been grappling with reduced purchase activity, relying heavily on
remortgages and product transfers to stay afloat. However, there is a glimmer of
hope as interest rates begin to decrease, potentially leading to a busier market in
the final quarter. Although recovery is inevitable, the timing remains uncertain, with
expectations of a smaller mortgage market this year and the next.
Andrew shared his experience of appearing on the Martin Lewis Money Show, and
stressed how important Martin’s influence is on the mortgage broker community,
given that he often recommends their services on prime time TV. The Labour Party
also reached out to Andrew in his role at AMI, and other industry representatives
to discuss the impact that the challenges of the mortgage market – particularly in
terms of rate rises – are having on people. They also discussed policy ideas that
might help ensure the housing market continues to improve. Andrew made the
point that to have a healthy housing market, you also need a healthy buyers’ market,
private rental sector and social housing sector. When it comes to housing policy,
everything is interlinked - so collaboration will be essential to building resilience.
The challenges that Andrew described mean it’s a tough time for brokers – but
they can still support their customers by staying informed and looking for specialist
lenders offering a diverse set of products beyond the traditional 10, 15 or 20 year
fixed rates. Andrew emphasised that those who are prepared to support their
clients and be available to advise, regardless of whether it brings them business, will
be best positioned to win when the market springs back.
Kensington business update
Ending the webinar on a high, Frances highlighted some of the new initiatives that
we have delivered over the last couple of months:
- We launched our new Resi 12 product to support the increasing numbers of
customers seeing credit blips on the credit profiles because of the cost-of-living
- We also launched our Shared Ownership remortgage product.
- Our new three year fixed rate product has been created in response to
feedback from brokers and customers about the demand for something
between the standard two year and five year options.
Mortgage Charter - We’re pleased to report that we were the first specialist lender
to sign up to the Charter. This allows us to help customers who are struggling in this
difficult economic environment.
Website updates - We also launched our new intermediary website. We’ve updated
lots of the pages to make it easier for you to navigate, including our BDM Finder.
You can use it to access our service levels, product details, new product launches,
webinars and blogs.
Service milestone - We’re delighted to announce that we have delivered 20
months of day one underwriting, while adhering to our promise of 48 hours
minimum notice on our standard product ranges.
This fascinating session left me feeling motivated and hopeful. My main takeaway was
that, with the economic situation remaining unpredictable, the specialist customer
matters more than ever – and as brokers and lenders, we need to make sure we’re
ready to adapt to them.
Finally, it’s encouraging to hear that there are reasons for optimism following the
turbulence of COVID and the cost-of-living crisis. I’m excited about the innovative
new products that Kensington has created in response to our customers’ needs and
feel proud of our commitment to outstanding service and responsible lending.
Eloise Hall - Head of National Accounts
Eloise joined Kensington Mortgages in 2019, bringing a wealth of experience from both Leeds Building Society and Principality Building Society, she has supported, nurtured and grown many of our key account relationships across the UK. Eloise has continued to grow Kensington’s brand as an innovative and forward-thinking specialist lender and has won an array of awards in her tenure at Kensington Mortgages including British Specialist Lender award for Lender: Business Development in 2021. Since Eloise’s promotion to Head of National Accounts she has also been awarded the 2022 Woman in Specialist Lending award at Financial Reporter Women’s Recognition Awards, Head of National Accounts at the 2022 British Specialist Lender awards, Relationship Account Manager of the Year at the Fintel Partnership Event in 2023 and Head of National Account at the 2023 British Specialist Lender awards.