Crystal balls at the ready – I have some questions that I’d like specific answers to if that’s okay with you. First up, as advisers could you please tell me what Bank Base Rate (BBR) will be in two years’ time? Alternatively, if that one’s a little tricky then perhaps you could simply tell me what the average two-year fixed rate mortgage price will be in the same timeframe? No?
Well, if that’s proving rather difficult to ascertain then let’s move the timescale forward a little bit? What about the end of the Brexit negotiations – can you tell me what rates will be doing then? No again? That crystal ball might need replacing. Okay, this is an easy one – what about six months’ time, surely you know how rates might change between now and then?
I suspect you’ll know where I’m heading with this overblown vignette but it’s probably the one question you get asked more than any other; that, and, ‘What’s the best rate at the moment?’ which is ostensibly the same question but just framed slightly differently.
The fact is that everyone expects advisers to be crystal-ball gazers; soothsayers who know exactly what the MPC is going to do for the next two/three/five years and should therefore be able to provide a mortgage to a client on which the risk of rates changing, and/or the borrower having to pay a little bit more than they anticipated, is absolutely zero. And of course at a time of significant uncertainty, with the Brexit negotiations under way – at least that’s what they’ve told us – then the need to deliver complete certainty in this area appears to have been ramped up even more.
But of course advisers can’t see into the future; they certainly aren’t able to tell clients what the lay of the land will be in two years’ time after we’ve been through a process which is likely to seismically alter our economy, our society and everything else in between. Though, this won’t stop the pressure being made to bear on advisers to try and do just that – to second guess what might happen with the added threat that, if in 24 months’ time, things haven’t gone as anticipated then they should be held culpable for their lack of future clarity.
It’s a rather confusing picture, especially for consumers and clients to hear that yes advisers should be able to know what happens next, like rates and pricing are some warped version of that particular round in A Question of Sport. Those who work at the coal-face know that it’s impossible, and all you can do is work with clients as their situation stands today, factfind, find the potential options, seek out their opinion and their aims and intentions, and judge the potential product options on what feedback you get. Making it absolutely clear that best advice does not mean an innate, super-power-esque ability to know exactly how the MPC, and subsequently lenders, might act when it comes to rates.
Advisers of course have a tricky job but predicting the future should not be part of their job spec, and neither should we really be saying that clients can’t have the products that they want. As long as it’s spelt out in no uncertain terms what they’re getting and they obviously meet the lender’s affordability and criteria, then if a client wants a two-year product, then it’s a free country and they should be allowed to get one. Especially if they have plans within those two years which might mean that a longer term is simply not appropriate.
I seem to remember us having been down this road before, with government-led reviews of the mortgage market which came back and said (ideally) borrowers would all be on ultra-long-term fixes. Everything seemed so simple until mortgage market stakeholders pointed out that customers don’t tend to want these products because they want the flexibility of shorter-terms and because they’re cheaper, the ERCs are over quicker, and of course a lot can happen in 24 months, let alone 10 years, which might warrant a change of mortgage loan.
So, from my perspective, we’ll be letting advisers get on with their jobs and letting them pick appropriate products that their clients want, not forcing products on them that might not be right at all. In a simple world, clients would have simple needs and circumstances, and the economy and everything else would be easily predictable – I think we all know that this isn’t the case and therefore we shouldn’t act like it is.
Richard Adams is managing director of Stonebridge Group