From rate rises and rebrands to retirement gaps and protection shortfalls, Malcolm Davidson rounds up September's biggest stories – and what they mean for brokers on the ground
September’s mortgage news had a common thread: change. Lenders changed rates, the government floated a new route onto the property ladder and one of the best-known names in British mortgages prepared us for a new identity. Yet two persistent gaps, namely retirement income and protection, showed how much work remains for our industry.
Rates on the move – even when Bank Rate isn't
The Bank of England held Bank Rate at 3.75%, but mortgage pricing certainly did not stand still! Rising funding costs led several lenders to increase fixed rates. Customers understandably ask why their mortgage rate can rise when Bank Rate has not. Our job is to explain the difference without pretending we can forecast the next move.
It also means being ready to act. Where a lender allows us to secure a rate early, that option can have real value in a rising market. We should be clear about the customer’s choices, the deadlines involved and the information/documentation needed to move a case forward.
Halifax, Lloyds and the value of a name
I recently attended a Halifax-to-Lloyds rebrand event. Halifax has been part of the high street and the mortgage market for so long that its name carries a great deal of familiarity, so I will be sorry to see it go.
At the same time, I do not think the move to Lloyds will be detrimental in the long term. Brokers will judge the change by the products, service and people they deal with, not simply the sign over the door. A strong name still matters to customers, but the experience behind it matters more. Lloyds has an opportunity to carry Halifax’s strengths into its next chapter and build upon that foundation.
Your First Home: ambition needs detail
Another proposed change is Your First Home. The government says the scheme, to be confirmed at the October Budget, is expected to let eligible first-time buyers purchase a participating new-build home with a 2.5% deposit and a 20% equity loan. After a flat period for the purchase market, that in theory sounds like the shot in the arm buyers, brokers and builders could use.
I am positive about the ambition, but like always, the detail will dictate whether it works. The eventual income and property price caps, lender appetite, new-build availability and equity-loan repayment terms will all be crucial. A lower deposit may well open a door, yet it cannot make an unaffordable home affordable.
The retirement income gap hiding in plain sight
The most significant later-life story was Fairer Finance’s Retirement Compass. Its modelling found that 65% of single female homeowner households aged 55 to 79 have, or are on track for, retirement income below the “moderate” living standard, despite holding an average £225,000 in housing wealth. That is a striking mismatch between the resources people own and the income they can use. A home can be valuable on paper while the person living in it still worries about monthly spending.
It should prompt more conversations, but definitely not a rush towards any one product. Some clients may be able to maintain payments on a standard mortgage or a retirement interest-only mortgage. For others, a lifetime mortgage could help them remain at home without compulsory monthly payments. Downsizing may be preferable for some. Each route changes the customer’s future finances and I would encourage mainstream Advisors to collaborate with specialist colleagues to compare all options before making recommendations for customers taking borrowing into retirement rather than let assumptions about age or equity release close off routes before advice even begins.
Protection: asking a better question
September also brought the FCA’s final pure protection market study. It found that 58% of adults have no pure protection product, and that 59% of those people have never considered their protection needs. Mortgage Advisors meet customers at a moment when the consequences of losing an income, becoming seriously ill or dying are especially relevant. That is our opportunity to ask a better question than “Do you want cover?”. What would actually happen to this household if the income paying the mortgage stopped?
We can show a fully protected ideal scenario, learn what the customer already has and recommend cover that meets their needs and budget. The decision remains theirs, but they deserve to understand it.
The month offered plenty of new labels and proposals. The lasting test is whether we help people make better decisions through them: quickly when rates move, carefully when borrowing shapes their retirement and honestly when discussing how to protect the home they have worked for.
Malcolm Davidson (pictured top) is managing director at UK Moneyman
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