From the ashes of disaster grow the roses of success. The problem is the ground isn’t very fertile and nobody’s watering the bed.
We’re in a recession again albeit more of an economy that is ‘bouncing along the bottom’ than a sharp drop and I don’t think the title ‘double dip’ is strictly accurate either. Too much time has passed since the last recession and it is barely a ‘dip’ this time around.
It is plain to see however that the outlook is still pretty grim.
National Australian Bank has announced the loss of jobs at Yorkshire and Clydesdale Banks between now and 2015 because the forecast for the European economy isn’t looking good for several years to come.
I guess this means interest rates are likely to be kept low for a few more years, if possible, to try and help households keep their heads above water and to encourage lending to businesses.
But what happens if mortgage lenders end up being forced to pay higher rates of interest on the money they borrow from money markets because of the state of the UK’s economy and the increased risk associated with lending to the UK? This would increase mortgage interest rates despite a low base rate at the Bank of England which would in turn put pressure on households, reduce the amount of disposable income and put more strain on an already fragile situation.
But if interest rates do go up it will actually be good news for – mortgage advisers!
As things stand, interest rates are low. Many home owners are currently sat on their mortgage lenders Standard Variable Rate because there simply aren’t any offers out there that can beat the rate they are on.
I personally know mortgage advisers with hundreds of existing clients who are just sat on their lenders SVR because at the moment it’s the cheapest place to be.
Imagine this, a mortgage adviser has 300 clients and all of a sudden they all want to remortgage. If the adviser makes an average of £1000 in fees and commission from each, there’s a quick £300,000 to be made!
So any mortgage advisers still active in the industry with a good solid client base are itching and twitching at the prospect of interest rate rises.
But every morning they wake up and look out the window only to see that things have not improved and today will not be their lucky day.
Some consolation may come from the fact that active independent mortgage advisers are now a rare breed. I heard (and I need to really double check this) that there are now only about 5,500 active independent mortgage advisers in the UK.
There are more advisers working but they include advisers in banks and building societies who are limited to what they can sell.
So if that figure is true and there are only 5,500 active independent advisers they will all be very busy and very happy when things start to improve – if they can wait that long!