The mortgage price war has been going on for a while now. Since August 2016 when the bank base rate was cut to 0.25 per cent following the Brexit referendum, mainstream lenders have been in a chase to the bottom.
Moneyfacts data published in March confirmed what those of us immersed in the mortgage market have long known – the relationship between Bank of England base rate and mortgage rates has changed dramatically
In March 2009 the Bank of England cut the base rate to 0.5 per cent following stock market crashes around the world as the full effects of Lehman Brothers’ collapse were felt.
Back then, the average two year fixed mortgage rate was 4.79 per cent, according to the data.
By March 2019, base rate had been down to 0.25 per cent and was back up to 0.75 per cent, where it sits today.
The average two-year fixed rate available today is 2.49 per cent. The same is true of the average five-year fixed rate which has fallen from 5.62 per cent to 2.69 per cent.
This highlights just how competitive the market has become in its drive to take market share, particularly on remortgages.
But there’s a quirk in the provision of mortgage finance that can be overlooked when we talk about the entire mortgage market in terms of averages.
The mortgage market is not homogenous, it’s the absolute opposite of this.
Borrowers are individuals and come in all ages, states of earning and employment– no two are ever exactly the same.
This is part of what is so impressive about the mortgage market in the UK; we are ourselves diverse enough to be able to cater for this broad spectrum of homeowner.
However, it’s been said a few times recently that perhaps the market isn’t doing quite as well as it might in terms of serving customers who, when thinking about the language of averages, can be considered outliers.
Volume lenders simply reject these borrowers without taking the time to consider their individual story, circumstances and needs.
Many write their criteria so as to completely bypass the newly self-employed on the basis that it’s just not cost effective to underwrite the case at the rates they’re having to charge to stay competitive and not lose market share.
This is a sensible commercial decision but it has the knock-on effect of cutting out large numbers of perfectly responsible, credit worthy borrowers from the market, even where they can easily afford their repayments.
And this, at a time when self-employment is becoming increasingly common in Britain.
‘Cannot afford to forget them’
Companies such as Uber, Deliveroo and Just Eat have grown staggeringly quickly in recent years. Professional and financial services firms, squeezed following the financial crisis, made mass redundancies, spawning thousands of new independent consultants working for themselves.
The ageing population and pressure on the ability of both individuals and the state to generate sufficient pension income not only means retiring later, it has also led to a rise in the number of older homeowners working part-time and for themselves later into life.
The Office for National Statistics found that the self-employed made up 15.1 per cent of the UK labour force in 2017 – a total of 4.8m people.
The number of women opting for self-employment is also rising – between 2000 and 2017 the number of self-employed women in the UK jumped 77 per cent.
According to trade body The Association of Independent Professionals and the Self-Employed (IPSE), there are currently 594,000 self-employed working mothers – making up one in seven self-employed people in the UK.
It is critical that, as a market, we do not fail to cater for these borrowers as well as the bog-standard two income, low loan-to-value (LTV), retirement 20 years away borrowers.
This is a growing contingent in society and one we cannot afford to forget.