The Intermediary – August 2026 - Flipbook - Page 22
RESIDENTIAL
Opinion
Brokers cannot
afford to ignore
Westminster
P
olitical uncertainty
has become a
familiar part of life
in Westminster. Keir
Starmer’s resignation
means Britain has now
seen six Prime Ministers leave office
in less than a decade. For mortgage
advisers, this is more than political
theatre. Time and again, changes in
political leadership have influenced
financial markets, funding costs and,
ultimately, the mortgage products
available to clients.
The lesson from the past decade
is clear. Markets do not punish a
Prime Minister for resigning. They
react to uncertainty, fiscal credibility
and confidence in the Government’s
economic direction. Those reactions
feed directly into swap rates, lender
pricing and borrower affordability.
The market reaction
The Brexit referendum remains
one of the clearest examples of
this. Following David Cameron’s
resignation announcement in June
2016, sterling suffered its largest oneday fall in the floating exchange rate
era, while investors rushed into UK
Government bonds, pushing the 10year gilt yield to a then record low of
around 1.09%.
Although mortgage rates remained
low thanks to Bank of England
intervention, sterling never fully
recovered, contributing to years of
imported inflation and increased
pressure on household finances.
By contrast, Boris Johnson’s
resignation in July 2022 generated a
relatively muted response. Reuters
reported that sterling held gains
on the day. Mortgage pricing was
already moving upwards as inflation
accelerated and lenders repriced
products in response to rising funding
20
The Intermediary | August 2026
costs. The real warning came only
weeks later. Liz Truss’s September
2022 mini-Budget triggered one of the
sharpest gilt market selloffs in modern
history. 30-year gilt yields rose by
around 1.2% in just three trading days,
forcing emergency intervention from
the Bank of England.
Paying attention
The market response to Starmer’s
departure has been far calmer.
Sterling weakened only modestly,
gilt yields edged higher and equity
markets remained mostly stable.
However, funding markets have
become more expensive. Five-year
sterling swap rates, which heavily
influence fixed-rate mortgage pricing,
have risen by around 0.25% to 0.30%
over the past month.
At the same time, UK Government
borrowing costs remain among
the highest in the G7, with 10-year
gilt yields reaching levels not seen
since 2008.
For brokers, these movements
maer far more than the political
headlines themselves. Lenders do
not simply price mortgages based on
Bank Rate. Swap rates, funding costs
and market confidence all influence
pricing decisions.
Millions refinancing
The timing could hardly be more
important, as around 1.8 million
fixed-rate mortgages are due to mature
during 2026. Many of these borrowers
secured rates close to historic lows
and will now be entering a very
different market.
Average 2-year fixed rates currently
stand at around 5.64%, with 5-year
fixes at approximately 5.60%.
Standard variable rates (SVR) remain
above 7%. For advisers, this creates
both a challenge and an opportunity.
HITEN GANATRA
is managing director
at Visionary Finance
Many borrowers will experience
payment increases regardless of which
lender they choose. The value of
advice increasingly lies in preparing
clients early, reviewing options well
before their product expires and
helping borrowers understand that
wider market conditions, rather than
individual lenders, are driving much
of the pricing.
Market under pressure
The wider backdrop also remains
challenging. The average first-time
buyer (FTB) in England is now aged
34, compared with 32 before the
pandemic, while the average deposit
requirement has risen above £61,000.
The Institute for Fiscal Studies
estimates that homeownership among
25 to 34-year-olds has fallen from 55%
in 1997 to around one-third today.
Affordability pressures continue
to test existing homeowners as
borrowing costs remain well above the
levels seen only a few years ago. This
makes market confidence even more
important.
The experience of recent years
demonstrates that when markets
lose confidence, mortgage borrowers
quickly feel the consequences. For
advisers, that means watching more
than just Bank Rate announcements.
Gilt yields, swap rates and fiscal policy
have become increasingly important
indicators of mortgage pricing.
Staying informed allows us to explain
those changes clearly, manage client
expectations and help borrowers make
informed decisions in markets that
can change far more quickly than
many expect. ●
