What the financial, property & mortgage themes of 2021 mean for 2022
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Well, what a year that was… financial, property & mortgage themes of 2021.
I could talk for hours about events of this year, and if you are after a very funny and yet scathing review of the year Frankie Boyle’s New World Order would be a great place to look. Granted he is not everyone’s cup of tea, but he is a very smart & insightful guy in an ever-increasingly bland TV comedy world…
However, I will very much stick to my knitting and look specifically at the financial, property & mortgage themes of 2021, taking what positives where we can.
Mortgage-free as soon as possible
Overall, it was a positive year in our little world and we have a very interesting 2022 ahead. It is worth reflecting for a moment on one of our core values which is – getting you mortgage-free as soon as possible.
It has never been lost on me that no one wants a mortgage! Or any debt for that matter, but you do want the outcome – the new house, where you want to live, being near your loved ones (or further away depending on your family!), more space for the kids, etc. So through that lens, I look at everything.
If you are interested in making the most of the opportunities ahead of you in the property world, and if nothing else, want to get your mortgage paid off ASAP (which can involve investing in other assets, property, etc to do this down the track), this is the review of the year for you. Not as funny as some other year-end reviews, but take heed of these lessons, and you will be all the better for it 🙏.
Move to monthly email with weekly social & podcast
Lastly, in an attempt to save all our inboxes, these emails will move to be monthly next year. A small goal I have for 2022 is to reduce the email traffic I send and receive, so this hopefully helps your inbox also!
I will still do these weekly updates, but we’ll move them onto our social feeds, website, and a revamped podcast. Our podcast is already the 3rd most popular mortgage podcast in the UK (which you can find on Spotify), so by the end of 2022 we aim to be No1, so watch out for that one 😊
2021 In Review
BoE Rate Rise
The big one in our world. Which ended with a slightly surprising move by the Bank of England to raise their benchmark rate to 0.25% (up from 0.1%).
If you look at the graph below, the direction of travel is very clear and we expect more rises in the coming months/years.
If you take money markets as a guide (which is by far your best option when gauging the probability of the Bank of England raising interest rates and therefore the knock-on impact to mortgage products), we are looking at around 3 more rises in the next 2 years, with just one in the next 3 years after that. Pretty much everything since 2016’s EU referendum result has shown us that the future is never as you predict, however, all things being equal, this is the best predictor we have.
Mortgage products and mortgage themes of 2021
More specifically when it comes to mortgage products, while rates will rise in the coming years, that won’t be fully felt in the mortgage world.
You will see the ‘best rates’ creep up, but in reality that is only a small proportion of the market, as these are for people borrowing 60% or less of their property value, and their personal situation is very straightforward.
As we deal with more affluent clients than the average brokerage, that is only a small part of what we do. If you are borrowing a greater % of the property, or your situation is more complex, you may well be paying a rate much higher than outlined above, and that highlights the issue.
Post-Covid, lenders had been charging huge margins for high LTV lending or more complex situations. That is starting to wash out as Covid fears subside and more competition is coming back to the market. We are starting to see formerly fringe players and new entrants starting to make a market in the mortgage world.
Competition drives down prices, it is as simple as that. Even while interest rates are rising, expect to see that trend continue, so if you only have a 5-10% deposit, or a complex situation, prices will continue to fall or at least stabilise in a rising market which will start to even out this current disparity.
Now more than ever expert advice is needed to navigate your way through this currently complex maze.
Mortgage lending and mortgage themes of 2021
Largest mortgage lending in history!
Off the back of concerns of a 2007 style credit crunch in 2020, we are finishing 2021 as one of the biggest years of mortgage lending in history with some staggering numbers:
- In 2019 £276B was lent via mortgages.
- In 2020 that dropped to £245B due to Covid.
- However, 2021 is set to go over £345B!
To see over a 40% increase in year-on-year lending is staggering.
There are many reasons for this – pent-up demand due to Covid & Brexit, the Stamp Duty holiday, mortgage rates falling, and lenders loosening criteria.
The current record for lending in one year was £371B in 2007, so we could even touch that if not this year, next.
As many were still unable to get the lending they want this year due to Covid or other factors, demand looks set to be equally high in 2022. Also, it is a bumper year for mortgage renewals, so you add that to a buoyant purchase market, this trend is set to continue.
Closely linked to the above, as mortgage money starts to flow more freely, guess what, house prices start to pick up (it’s not rocket science this game…).
We have seen staggering growth in some regions of the UK as there was quite an outpouring of people from London and the South East to the South West of England with a surfboard tucked under their arm, as evidenced by Taunton in Somerset having the largest house price gain of any other part of the UK at 21.8%.
But it was the North that was the overall ‘winner’ last year (if you feel soaring house prices is a good thing), as 15 of the top 20 areas for growth were north of Watford (which I consider ‘the North’).
London house prices
London prices reached an all-time average high of £507,230 according to the Nationwide Building Society, but growth in the capital overall was the most sluggish region of the UK at 4.2% vs a national average of 10.4%.
2022 Property Prices
Are we also set for a bumper 2022? It’s unlikely.
A poll of experts from Reuters expects to see 0.5% growth per month, or 6% pa next year.
On a national level, that feels about right, but we may see a reverse of the trends we saw last year. As international markets open up, and some people are drawn back to London, we may start to see London and the South East regain the traditional top spot. It will very much depend on people’s working practices next year and beyond – will there be more of a drive to get back in the office, or is remote/hybrid working here to stay? – As ever, I suspect the truth is in the middle as there will be a drive back to office working but I suspect not full time which makes longer commutes more achievable.
Money markets all jumped up around 25 basis points after the relative surprise move from the Bank of England earlier in the month, so no surprises there and nothing more to add to what is talked about above.
In the last week:
3 Month Sterling = up by 0.153 at 0.239%
2 Year SWAP = up by 0.238% at 1.210%
5 Year SWAP = up by 0.212% to 1.289%
Bank of England Base Rate = up by 0.15% to 0.25%
2 Year Variable from 0.89%
2 Year Fixed Rates from 1.09%
5 Year Fixed Rates from 1.25%
BTL Rates from 0.99%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec December 2021
If you want to know what impact these mortgage themes of 2021 may have on you specifically, please get in contact with one of our team who will happily talk you through how best to navigate these themes based on your specific situation.