There have been days recently when mortgage broker Aaron McElhinney got more than 25 voicemails on his mobile – and each time he answered he got two more.
“I have never seen so much panic, more than the crash of 2008,” says the Derry financial expert. “It’s different this time around, in that people are being pulled back and forth with the cost of energy bills and the cost of their mortgages.”
For more than a decade, Northern Ireland homeowners have been paying low interest rates that have fallen to what a Belfast estate agent described as “abnormal” levels in the aftermath of the pandemic.
The economic turmoil caused by the UK government’s recent mini-budget has forced mortgage lenders to temporarily withdraw products and raised fears of a surge in repayments by next spring. Some economists have predicted that the Bank of England will raise its base interest rate from the current 2.25% to 5.8%.
Boiling the kettle for a coffee break, Derry estate agent Stephen McCarron and his colleagues debate the fallout.
While “the phones are still ringing,” customers have been more “aware of their purchases,” says McCarron, director of Donnybrook Estate Agents.
“Looking at it in isolation, there is panic and fear,” he adds. “We haven’t seen anything like it for some time. But I have to remind people that when Covid-19 came around, we had almost the same conversation when the market panicked and people thought it was the end of the world. This was not the case.
“This time, I think it will affect the market. I see no impact on the value of the property.
“There is so much uncertainty – and that uncertainty is fueled by lenders watching the market and waiting to reprice their products. There are people who are worried about their mortgage going to 10%. It’s all guesswork.
“We are now in a period where, after all, everyone has to take a breather and take a step back. If next week lenders come back after reviewing their products and it’s not as punitive, things will hopefully settle down.
There are people who fear that their mortgage will go to 10%. It’s all guesswork
McCarron, who is chairman of NAEA Propertymark, the representative body for estate agents in the UK, recently held a regional executive council meeting with colleagues representing 17,000 members.
“At this point, no realtor has had anyone removed from a sale,” he said. “The only thing is that a member noticed that a mortgage offer had been withdrawn.”
The UK government last week announced a reversal of Chancellor Kwasi Kwarteng’s plans to scrap the top tax rate for high earners. The move led markets to predict mortgage rates would peak at 4.96%, rather than 6%.
A Co Antrim financial adviser said he was inundated with ‘stressful’ customer calls.
“In my 34 years working in financial services, I have never experienced this,” said the adviser, who did not want to be named.
“I got a text this morning from someone saying he was getting ‘obsessed’ with the projected hike as his fixed rate mortgage ends next spring.
“People are asking you to pull out your crystal ball and tell them if they should move their mortgage now and incur a £2,500 prepayment charge.
“But the problem is if there’s a reversal of fortune and you end up with an offer that’s lower than my perceived rate, I’m going to face a financial services compensation bill.”
Interest rates were essentially a quarter of a percent above zero. It does not mean anything. No financial institution will survive on this
The Covid emergency measures introduced two years ago have caused interest rates to fall to 0.1% – the lowest on record in the Bank of England’s 325-year history. Last December, they were raised to 0.25% in response to calls to tackle soaring prices.
“You were basically a quarter percent above zero. It does not mean anything. No financial institution will survive on this,” says Samuel Dickey, director of Simon Brien Residential in Belfast.
Despite the market volatility, Dickey says it’s been “business as usual” for his business.
“On the ground, what I see is that buyers have not withdrawn from any sale. They keep going and they intentionally bid on the asking price,” he says.
“Anecdotally, I hear that people try to agree on the terms of their mortgages because they know that when the fixed term expires they will pay higher interest rates .
“But I think there’s a whole cohort of people who have gotten very used to the fact that we’ve had very low interest rates over the last 14 years, which is an unusually long period of time, and an abnormal interest rate of 0.25% for months.
“If you remember the boom days of 2006 and 2007, interest rates were 5%. The market was stratospheric in terms of value. The average value of our property in 2007 was £220,000. Today it’s £169,000. We are therefore far from these levels.
At the northwest offices of Smart Mortgages, McElhinney sifts through hundreds of emails. Twenty minutes earlier, he learned that Danske Bank was temporarily withdrawing its mortgage products.
“It’s a very fluid situation. Right now it’s a guessing game,” he says.
“I see today rates of up to 6.15% for existing customers of a single bank. It is very important for them to make sure they get a broker and get the right deal for them.
“There are a lot of people who are scared, I have to be honest. I’ve had clients call me with mortgages as low as £20,000 to £25,000 wondering what their repayments would be if the rate went to 10% – and would they lose their house.
“There is so much uncertainty that fuels the panic. You have to strip it all down, wait for the announcements to be made and have peace of mind. »