WEBVTT 1 00:00:02.030 --> 00:00:06.390 Good afternoon, everyone on this sunny Friday afternoon, 2 00:00:06.430 --> 00:00:10.880 welcome to the Barclays Mortgage Intermediaries Economic Outlook 3 00:00:10.920 --> 00:00:13.130 on the Housing Market Webinar. 4 00:00:13.170 --> 00:00:16.140 I'm Sian McIntyre. I'm the Head of Acquisition Engagement 5 00:00:16.180 --> 00:00:19.640 for the Barclays UK and Life Moments division. 6 00:00:19.680 --> 00:00:22.200 And in that role I have an absolute privilege 7 00:00:22.240 --> 00:00:25.150 of leading our Intermediary team. 8 00:00:25.190 --> 00:00:28.239 I'm joined today by two fantastic guests 9 00:00:28.279 --> 00:00:31.103 who are going to help us unpack what's going on 10 00:00:31.143 --> 00:00:36.783 as we try and navigate what I hope to be a much rosier 2024. 11 00:00:36.823 --> 00:00:38.970 But just before I introduce both of them 12 00:00:39.010 --> 00:00:42.450 and we jump into it, I do have a disclaimer. 13 00:00:42.490 --> 00:00:45.470 The views expressed in this webinar by our guests 14 00:00:45.510 --> 00:00:48.440 are not necessarily the views of Barclays, 15 00:00:48.480 --> 00:00:50.080 but what I can say is they're definitely the views 16 00:00:50.120 --> 00:00:52.890 I'm very interested in hearing more about. 17 00:00:52.930 --> 00:00:57.020 So, a very warm welcome. Let me first go to Alex. 18 00:00:57.060 --> 00:00:59.019 We've got Alex Maddox 19 00:00:59.059 --> 00:01:03.310 who leads the Barclays Funding and Securitisation team. 20 00:01:03.350 --> 00:01:08.300 Prior to that, Alex was responsible for Capital Markets and Execution 21 00:01:08.340 --> 00:01:11.070 and the digital strategy for Kensington. 22 00:01:11.110 --> 00:01:13.250 Having spent time at Deutsche Bank 23 00:01:13.290 --> 00:01:16.770 and over 15 years in investment banking. 24 00:01:16.810 --> 00:01:19.376 A warm welcome, Alex. 25 00:01:19.416 --> 00:01:21.760 We also have today Rob Thomas. 26 00:01:21.800 --> 00:01:24.470 So, the Principal Researcher from IMLA, 27 00:01:24.510 --> 00:01:27.440 previously served as an economist at the Bank of England, 28 00:01:27.480 --> 00:01:30.830 so very well placed to help us navigate what's going on. 29 00:01:31.263 --> 00:01:34.380 And Rob also spent time at UBS 30 00:01:34.420 --> 00:01:38.910 and was also Senior Policy Advisor to the Council of Mortgage Lenders, 31 00:01:38.950 --> 00:01:41.080 amongst many other things. 32 00:01:41.840 --> 00:01:45.190 I'm an eternal optimistic person. 33 00:01:45.230 --> 00:01:47.190 I've definitely come into 2024 34 00:01:47.230 --> 00:01:50.350 thinking I'm going to manifest positive moment 35 00:01:50.390 --> 00:01:53.560 and it's great to see some of the lead indicators. 36 00:01:53.600 --> 00:01:56.690 But some of the shifts we've seen even in the last few weeks, 37 00:01:56.730 --> 00:02:00.330 whether it was the inflation print or lenders taking rates up, 38 00:02:00.370 --> 00:02:04.720 are certainly stark reminder that we remain in a transitional period. 39 00:02:04.760 --> 00:02:06.200 So, it's Friday. 40 00:02:06.650 --> 00:02:09.803 We're here to hear from our experts. 41 00:02:09.843 --> 00:02:12.737 I'm in sunny Cardiff. It's blue sky. 42 00:02:12.777 --> 00:02:15.060 Absolutely beautiful down here. 43 00:02:15.100 --> 00:02:18.060 A complete contrast to the weather earlier this week, 44 00:02:18.100 --> 00:02:19.930 and perhaps a mirror of what, 45 00:02:19.970 --> 00:02:23.190 of how we are feeling about what's going on. 46 00:02:23.230 --> 00:02:25.623 So, there is, despite my optimism, Alex, 47 00:02:25.663 --> 00:02:29.740 there is definitely data and science behind what is happening. 48 00:02:30.223 --> 00:02:36.090 One month in and lots of shifting and sometimes conflicting indicators. 49 00:02:36.130 --> 00:02:39.070 We've got hundreds of brokers on the line today. 50 00:02:39.110 --> 00:02:41.200 We're all trying to run our businesses. 51 00:02:41.240 --> 00:02:45.700 We're definitely all hoping for a much better year than 2023. 52 00:02:45.740 --> 00:02:48.290 I'm going to hand over to you for the next 20 minutes or so. 53 00:02:48.330 --> 00:02:50.100 If you could just give us your perspective 54 00:02:50.140 --> 00:02:54.270 on how we interpret what's going on, so we can start informing 55 00:02:54.310 --> 00:02:57.140 and making some good business decisions for the year ahead. 56 00:02:57.180 --> 00:02:58.599 Over to you, Alex. 57 00:02:59.430 --> 00:03:01.200 Yeah. Thank you Sian. Thanks for the introduction. 58 00:03:01.240 --> 00:03:04.496 And thank you everyone for joining. Yeah, I think it's you know, 59 00:03:04.536 --> 00:03:05.820 it's one of the most difficult things, isn't it? 60 00:03:05.860 --> 00:03:09.756 We all get asked by friends as well as, I guess if you're an intermediary 61 00:03:09.796 --> 00:03:12.250 by your customers, should I be locking in rates now? 62 00:03:12.290 --> 00:03:14.700 Should I do a two-year? Should I do a five-year? 63 00:03:14.740 --> 00:03:16.200 You know, everyone asks that question 64 00:03:16.240 --> 00:03:18.980 and we ask it often for ourselves as well with our own mortgage. 65 00:03:19.020 --> 00:03:23.251 And it's one of the most difficult things to to answer, I think. 66 00:03:23.291 --> 00:03:27.983 And, we, I'll try to put a few, 67 00:03:28.023 --> 00:03:30.940 a few ideas out there about what might happen, 68 00:03:31.850 --> 00:03:34.050 sort of going forward and why. 69 00:03:34.090 --> 00:03:36.710 The one thing, I actually haven't got a slide covering this in the deck, 70 00:03:36.750 --> 00:03:38.890 but I did once before, 71 00:03:38.930 --> 00:03:41.030 there was a massive increase 72 00:03:41.070 --> 00:03:45.930 in the amount of five-year fixed back in sort of 2022/2023. 73 00:03:45.970 --> 00:03:50.583 And I think that's a great job done by the intermediary market out there 74 00:03:50.623 --> 00:03:54.960 and extending customers' fixed rate terms when rates were nice and low. 75 00:03:55.000 --> 00:03:57.283 So, I think you probably did a better job 76 00:03:57.323 --> 00:03:59.390 at predicting where rates were going than the markets did, 77 00:03:59.430 --> 00:04:01.330 because an awful lot of the markets 78 00:04:01.370 --> 00:04:03.803 thought the rates were going to stay low for longer. 79 00:04:03.843 --> 00:04:07.070 Maybe you kind of, you know more than I do, anyway. 80 00:04:07.110 --> 00:04:08.890 But we'll see here what's going on. 81 00:04:08.930 --> 00:04:11.580 Actually, it's a bit of a switch recently to floating rates products. 82 00:04:11.620 --> 00:04:14.500 So again, maybe the intermediary market 83 00:04:14.540 --> 00:04:17.030 is a leading indicator of what's really going to happen 84 00:04:17.070 --> 00:04:18.100 rather than the markets. 85 00:04:18.140 --> 00:04:21.940 But in the meantime, I'll give you the market overview, 86 00:04:21.980 --> 00:04:23.290 and we'll take it from there. 87 00:04:23.330 --> 00:04:25.850 And feel free to call me in two years' time 88 00:04:25.890 --> 00:04:27.200 and tell me that I was wrong. 89 00:04:28.210 --> 00:04:31.200 Because actually, I won't say things about economists with Rob after me, 90 00:04:31.240 --> 00:04:34.070 but, you know, being an economist and trying to predict the market 91 00:04:34.110 --> 00:04:37.450 is famously difficult. 92 00:04:37.490 --> 00:04:38.300 So on this slide, 93 00:04:38.340 --> 00:04:42.340 I think it's always useful to give some context. 94 00:04:42.783 --> 00:04:45.950 I know from my team, very young team, 95 00:04:45.990 --> 00:04:48.160 I had, you know, people saying, oh my God, 96 00:04:48.200 --> 00:04:50.440 can rates ever go to 4 or 5? 97 00:04:50.480 --> 00:04:53.590 Can they stay there? And if you look at this blue line here, 98 00:04:53.630 --> 00:04:56.340 which is the the Bank of England rate here, 99 00:04:56.380 --> 00:04:58.092 you know, it was really, really high. 100 00:04:58.132 --> 00:05:01.140 A lot of people may know family members or friends 101 00:05:01.180 --> 00:05:05.580 or even ourselves who had mortgages during the 80s and early 90s 102 00:05:05.620 --> 00:05:11.350 and that brutal time of inflation and unaffordable mortgages. 103 00:05:11.390 --> 00:05:13.330 And then, of course, we have this benign environment, 104 00:05:13.370 --> 00:05:17.110 which was almost the exact opposite, sort of post-GFC. 105 00:05:17.150 --> 00:05:20.180 And for a long time, I think, you know, all credit to the central bank 106 00:05:20.220 --> 00:05:24.360 and perhaps, Rob's input to being an economist there during this period. 107 00:05:24.400 --> 00:05:29.770 But CPI inflation was kept under control for so long 108 00:05:29.810 --> 00:05:35.260 and then suddenly you can see that red line spike, we've all felt it. 109 00:05:35.883 --> 00:05:39.157 And I guess the question really from here is what happens, 110 00:05:39.197 --> 00:05:42.810 what happens next, is this going to continue? 111 00:05:42.850 --> 00:05:44.938 The good news is it's come down. 112 00:05:44.978 --> 00:05:47.690 Rob can probably explain more about what's happening recently, 113 00:05:47.730 --> 00:05:51.460 but we have seen that a slight sort of stabilisation, 114 00:05:51.500 --> 00:05:56.937 shall we say, in the last month or so in the inflation rate. 115 00:05:56.977 --> 00:06:00.810 And also, I guess, Bank of England rates do seem to have peaked at this point. 116 00:06:00.850 --> 00:06:04.596 But when you look back over that longer timeline, 117 00:06:04.636 --> 00:06:08.950 the level of the blue line of base rates is not actually that high. 118 00:06:09.630 --> 00:06:11.720 And hopefully we'll come down a little bit, 119 00:06:11.760 --> 00:06:15.980 but I think we just have to get used to a return to normal 120 00:06:16.020 --> 00:06:17.110 rather than a new normal. 121 00:06:17.150 --> 00:06:21.990 This is what it was really since mid-90s. 122 00:06:22.030 --> 00:06:24.087 If we just move through to the next slide. 123 00:06:24.990 --> 00:06:28.383 I think this one is quite interesting. 124 00:06:28.423 --> 00:06:29.790 I think, when you read the press, 125 00:06:29.830 --> 00:06:33.760 you think this is all about us or all about Truss. 126 00:06:33.800 --> 00:06:35.980 May be an even better sort of definition. 127 00:06:36.020 --> 00:06:38.060 And this was all caused by, you know, 128 00:06:38.100 --> 00:06:43.240 actions of Liz Truss in her, however few days it was. 129 00:06:43.280 --> 00:06:45.600 But actually, this story is a global story. 130 00:06:45.640 --> 00:06:49.590 It's not just caused by the UK. We have our own version of it. 131 00:06:49.630 --> 00:06:52.050 And certainly what happened then didn't help. 132 00:06:52.090 --> 00:06:54.430 But, you know, the path of interest rates. 133 00:06:54.470 --> 00:06:56.860 You can see the blue line is Bank of England, 134 00:06:56.900 --> 00:07:00.670 the green line is the US Fed funds rate. their equivalent, 135 00:07:00.710 --> 00:07:04.200 and the ECB rate for Europe is there, what they call their main rate, 136 00:07:04.240 --> 00:07:06.517 have all been very, very similar. 137 00:07:06.557 --> 00:07:10.670 Over the years I've generally seen that the US tends to move first. 138 00:07:10.710 --> 00:07:13.480 And I think if you look at that 2016 point, 139 00:07:13.520 --> 00:07:17.760 you can see how the US started sort of putting up interest rates 140 00:07:18.183 --> 00:07:22.070 before we got to... really before we got to Covid, 141 00:07:22.110 --> 00:07:26.490 and got rates up to about 2% really, while the UK was increasing a little bit. 142 00:07:26.530 --> 00:07:30.000 And the Europeans in my experience are usually the last to move. 143 00:07:30.040 --> 00:07:33.423 And you can see that they didn't actually do anything during that period. 144 00:07:33.463 --> 00:07:38.237 And the US had to sort of change path and drop rates back down again, 145 00:07:38.277 --> 00:07:41.370 as Covid hit and took them pretty much down to zero, 146 00:07:41.410 --> 00:07:43.680 where the UK had headed down to 147 00:07:43.720 --> 00:07:46.590 and the European Central Bank was still there, as I said. 148 00:07:46.630 --> 00:07:50.910 But all three central banks have been increasing rates. 149 00:07:50.950 --> 00:07:53.850 And yeah, that's because inflation is a global problem. 150 00:07:53.890 --> 00:07:56.460 You know, the issues we've seen from Ukraine, 151 00:07:56.500 --> 00:07:59.950 have impacted everybody. 152 00:07:59.990 --> 00:08:06.071 Food prices, petrol prices, it's a massive deal. 153 00:08:06.111 --> 00:08:10.410 I don't say... In the US, we have, I think it was, 154 00:08:10.450 --> 00:08:12.901 the type of mortgage market is also important 155 00:08:12.941 --> 00:08:16.000 for the intermediary and for customers 156 00:08:16.040 --> 00:08:20.480 and spare a thought for your US equivalent because over there they have 157 00:08:20.520 --> 00:08:22.830 a 30-year fixed rate mortgages is the norm. 158 00:08:22.870 --> 00:08:27.016 And there are a few of us in the UK market that offer that product. 159 00:08:27.056 --> 00:08:30.400 Kingston has a product which we developed recently. 160 00:08:30.440 --> 00:08:33.180 And in the US it's the norm. 161 00:08:33.220 --> 00:08:38.800 And an awful lot of customers have locked in mortgages at 3% for 30 years. 162 00:08:38.840 --> 00:08:40.000 And so as you might imagine, 163 00:08:40.040 --> 00:08:45.150 the amount of mortgage refinancing going through is almost nothing. 164 00:08:45.190 --> 00:08:49.780 And so, yeah, much worse to be an intermediary over there than in the UK. 165 00:08:49.820 --> 00:08:53.220 And as a result of that, actually, very few people have moved house 166 00:08:53.260 --> 00:08:55.760 and people are generally spending money 167 00:08:55.800 --> 00:08:59.560 improving their houses rather than moving houses. 168 00:08:59.600 --> 00:09:01.620 And you've seen that's driven up house prices. 169 00:09:01.660 --> 00:09:04.930 It has normalised a little bit recently, but a massive increase 170 00:09:04.970 --> 00:09:08.480 because there's a shortage of building, again similar to the UK, 171 00:09:08.520 --> 00:09:10.620 and no one willing to sell 172 00:09:10.660 --> 00:09:14.070 because over there, if you sell then you have to give up your mortgage 173 00:09:14.110 --> 00:09:18.237 and move out of a 3% for life to a 7% for life. 174 00:09:18.277 --> 00:09:20.630 And that's a very, very expensive decision, 175 00:09:20.670 --> 00:09:24.906 which you'll only take if some kind of life situation 176 00:09:24.946 --> 00:09:26.970 means that you have to do that. 177 00:09:27.010 --> 00:09:30.357 The European market tends to have more floating rate mortgages, 178 00:09:30.397 --> 00:09:31.863 more like the UK. 179 00:09:31.903 --> 00:09:34.530 Probably with the exception of the Netherlands and Germany, 180 00:09:34.570 --> 00:09:37.390 where again, there is a lot of longer-term fixed. 181 00:09:37.430 --> 00:09:40.717 But I think we've seen a lot of talk about the pros and cons 182 00:09:40.757 --> 00:09:43.070 of having a floating rate mortgage market 183 00:09:43.110 --> 00:09:45.980 versus a long-term fixed rate mortgage market. 184 00:09:46.020 --> 00:09:49.540 And I think there's sort of, in some ways it's good 185 00:09:49.580 --> 00:09:52.070 because you get the transition mechanism, 186 00:09:52.110 --> 00:09:54.260 as the central bank wants to put up rates, 187 00:09:54.300 --> 00:09:57.030 the affordability starts to kick in quicker 188 00:09:57.070 --> 00:09:59.300 in floating rate markets like the UK. 189 00:09:59.340 --> 00:10:02.410 I know we've all had our issues trying to get affordable mortgages out there 190 00:10:02.450 --> 00:10:05.000 and, you know, getting customers to pass affordability. 191 00:10:05.040 --> 00:10:09.090 But that ultimately has been somewhat the goal of the central bank 192 00:10:09.130 --> 00:10:12.160 in the US market. But they don't have that ability 193 00:10:12.200 --> 00:10:14.520 because customers just don't reset their mortgages. 194 00:10:14.560 --> 00:10:22.270 So, that transmission mechanism is not nearly so powerful. 195 00:10:22.310 --> 00:10:24.260 Maybe we just move onto the next slide, please. 196 00:10:25.670 --> 00:10:27.957 We talk a lot about swaps. 197 00:10:27.997 --> 00:10:30.590 And hopefully, all of you have heard... many of you who have listened to me before 198 00:10:30.630 --> 00:10:34.070 will have hear me bang on and on about swaps and swaps are important, 199 00:10:34.110 --> 00:10:35.710 and we'll talk about them a bit more. 200 00:10:35.750 --> 00:10:38.440 But, I'd like to talk about a slightly different type of swap. 201 00:10:38.480 --> 00:10:40.380 We normally talk about interest rate swaps, 202 00:10:40.420 --> 00:10:42.470 and this is an inflation swap here. 203 00:10:42.510 --> 00:10:47.890 And what this is, it's a product in the market where the market makers, 204 00:10:49.177 --> 00:10:54.750 trade instruments linked to where inflation is expected to be going forward. 205 00:10:54.790 --> 00:10:57.100 And so you can look at this, if you look at the green line, 206 00:10:57.140 --> 00:10:59.300 which is the one-year inflation swap, 207 00:10:59.340 --> 00:11:01.880 that's the market's best estimate of inflation 208 00:11:01.920 --> 00:11:03.840 on average over the next year. 209 00:11:03.880 --> 00:11:06.680 And the blue line is the five-year inflation swap. 210 00:11:06.720 --> 00:11:09.760 So that's where the market thinks inflation would be 211 00:11:09.800 --> 00:11:13.220 on average over the next five years. 212 00:11:13.260 --> 00:11:16.390 And you can see there that it's trending, both of those lines 213 00:11:16.430 --> 00:11:19.163 are have been trending for quite a while now 214 00:11:19.203 --> 00:11:25.440 well above the 2% target rate of inflation from the Bank of England. 215 00:11:26.057 --> 00:11:30.910 And you can see that massive spike in 2022 and 2023 where, 216 00:11:30.950 --> 00:11:35.060 you know, the market was expecting inflation to peak up to 10%. 217 00:11:35.100 --> 00:11:37.060 And I guess it did. 218 00:11:37.100 --> 00:11:42.320 And it's come down during that period or during the sort of subsequent period. 219 00:11:42.360 --> 00:11:45.310 But I think what's quite interesting here is that this, 220 00:11:45.350 --> 00:11:50.540 this market is still predicting that inflation will stay high at around 3.5%. 221 00:11:50.580 --> 00:11:55.460 So well above the central bank target rate, 222 00:11:55.500 --> 00:11:59.520 which in some ways we would expect as a result of that, 223 00:11:59.560 --> 00:12:02.470 that rates will stay higher for longer 224 00:12:02.510 --> 00:12:06.290 in order to try to push those inflation expectations down. 225 00:12:06.330 --> 00:12:09.500 And I'm sure Rob will talk more about this kind of thing going forward. 226 00:12:09.540 --> 00:12:12.283 When you look at views from different economists 227 00:12:12.323 --> 00:12:14.425 across the the market, 228 00:12:14.465 --> 00:12:16.610 generally, people saw, a lot of people think inflation 229 00:12:16.650 --> 00:12:19.270 could drop to 2% during the summer, 230 00:12:19.310 --> 00:12:23.710 which would be a welcome change from what this forecast is saying. 231 00:12:23.750 --> 00:12:27.150 And obviously, if inflation does drop down to that 2%, 232 00:12:27.190 --> 00:12:31.720 then hopefully we can see that reduction in base rates to do that. 233 00:12:31.760 --> 00:12:36.220 So maybe an argument there for floating if you believe that story, 234 00:12:36.260 --> 00:12:38.430 you know, floating rate product could be pretty attractive 235 00:12:38.470 --> 00:12:40.840 if you believe that inflation is going to stay longer, 236 00:12:40.880 --> 00:12:43.230 stay higher for longer and rates higher for longer, 237 00:12:43.270 --> 00:12:46.350 then probably, you know, a tougher call 238 00:12:46.390 --> 00:12:49.050 in what to recommend to your customers. 239 00:12:50.120 --> 00:12:53.287 And maybe if we go through to the next slide, please. 240 00:12:55.223 --> 00:12:57.920 Yeah, I think... So, what I've tried to do here is, 241 00:12:57.960 --> 00:13:01.100 include... look at where rates may go, 242 00:13:01.140 --> 00:13:04.590 because I think that's probably the most frequent question that I get is, 243 00:13:04.630 --> 00:13:08.280 you know, are our mortgage rates going to be higher or lower in six months' time? 244 00:13:08.320 --> 00:13:10.510 And I can't tell you because I don't have a crystal ball, 245 00:13:10.550 --> 00:13:14.190 but I can tell you at least what the market thinks. 246 00:13:14.230 --> 00:13:17.590 And so this brings me back to that point about interest rate swaps. 247 00:13:17.630 --> 00:13:20.200 So, the interest rate swap is, I like to think of it, 248 00:13:20.240 --> 00:13:22.860 it's like the average of the market's expectation 249 00:13:22.900 --> 00:13:26.200 of the average base rate over the period. 250 00:13:26.240 --> 00:13:29.140 So a two-year swap is what the market thinks 251 00:13:29.180 --> 00:13:32.240 the average base rate is going to be over that two years. 252 00:13:32.280 --> 00:13:37.710 So right now as of this morning two-year swaps are about 4.3%. 253 00:13:37.750 --> 00:13:41.890 So, that's the market expectation for average base rate, 254 00:13:41.930 --> 00:13:43.303 base rate is currently five and a quarter. 255 00:13:43.343 --> 00:13:46.970 So, somehow the market thinks they're going to start at 5.25 256 00:13:47.010 --> 00:13:50.470 and I guess end at 3.25 in two years' time. 257 00:13:50.510 --> 00:13:54.580 So that they average about 4.2 over that two-year period. 258 00:13:55.800 --> 00:13:59.210 Rightly or wrongly, that's what the market thinks. 259 00:13:59.250 --> 00:14:03.596 Swaps are fundamental to pricing of almost all mortgage businesses. 260 00:14:03.636 --> 00:14:06.260 So I can't really think of any business 261 00:14:06.300 --> 00:14:07.970 which won't be looking at the swap market 262 00:14:08.010 --> 00:14:11.660 when they're working out where to set mortgage rates. 263 00:14:11.700 --> 00:14:14.677 And the reason for that is the most mortgage lenders 264 00:14:14.717 --> 00:14:17.662 hedge out their interest rate risk using swaps. 265 00:14:17.702 --> 00:14:22.710 Certainly the case for the wholesale and most of the retail lenders 266 00:14:22.750 --> 00:14:25.700 and therefore I would recommend, you know, keep an eye on swap rates. 267 00:14:25.740 --> 00:14:28.380 You can go onto Google and look up two-year swap rate, 268 00:14:28.420 --> 00:14:31.110 which will give you a good feel for the two-year mortgage rate. 269 00:14:31.150 --> 00:14:35.080 And then, you know, five-year swap rate for the five-year mortgage rate. 270 00:14:35.120 --> 00:14:37.980 And what I recommend is you kind of watch those 271 00:14:38.020 --> 00:14:40.840 because if you see those swap rates ticking up on Google, 272 00:14:40.880 --> 00:14:44.090 you're probably, it's a good sign that mortgage rates are about to pick up a bit. 273 00:14:44.130 --> 00:14:45.910 Like Sian said, recently, you know, 274 00:14:45.950 --> 00:14:49.860 swap rates have picked up from around 4% to 4.3%. 275 00:14:49.900 --> 00:14:53.850 And some of those wonderful rate cuts that we've been seeing got curtailed 276 00:14:53.890 --> 00:14:56.530 and even started to increase a little bit. 277 00:14:56.570 --> 00:14:59.060 If you see swap rates dropping down rapidly, 278 00:14:59.100 --> 00:15:02.770 then probably says that, you know, cheaper mortgages are on their way. 279 00:15:02.810 --> 00:15:05.340 There's usually a lag of a week or two 280 00:15:05.380 --> 00:15:08.980 between swap rates moving and mortgage rates moving. 281 00:15:09.020 --> 00:15:12.380 So, always a good thing to keep an eye on. 282 00:15:12.783 --> 00:15:14.737 But what I've done here is, 283 00:15:14.777 --> 00:15:18.417 generally if we look at, on average, the two-year swap rate, 284 00:15:18.457 --> 00:15:20.800 which is that dark blue line, 285 00:15:20.840 --> 00:15:23.750 the fixed rate is the Bank of England time series, 286 00:15:23.790 --> 00:15:26.960 is roughly 50 basis points over the swap rate. 287 00:15:27.377 --> 00:15:31.760 And so what I've done is, for sort of from Jan 24 onwards, 288 00:15:31.800 --> 00:15:34.750 I've put in there where the swap market is expected to be, 289 00:15:34.790 --> 00:15:37.340 and you can see that swaps are expected to drop down 290 00:15:37.380 --> 00:15:39.820 to about three and a half within a year. 291 00:15:39.860 --> 00:15:43.600 So by Jan 25, swaps are expected to be at 3.25. 292 00:15:43.640 --> 00:15:45.760 And so, you know, we might expect mortgages 293 00:15:45.800 --> 00:15:49.770 to be in that sort of 3.75 to sort of 4% range. 294 00:15:49.810 --> 00:15:52.379 I've shown them around 4% there. 295 00:15:52.419 --> 00:15:57.500 Also, we see that SVR tends to track the Bank of England base rate 296 00:15:57.540 --> 00:16:00.410 rather than the swap rates because it's a floating rate index. 297 00:16:00.450 --> 00:16:04.710 And that, you know, based on where base rate expectations are, 298 00:16:04.750 --> 00:16:10.470 we'd expect SVRs to drop down to about 6% by 2026. 299 00:16:10.510 --> 00:16:15.264 And still a big difference between two-year mortgage rates and SVRs, 300 00:16:15.304 --> 00:16:17.020 probably telling you that there's going to be a great, 301 00:16:17.060 --> 00:16:20.700 a great market for product switches or remortgaging 302 00:16:20.740 --> 00:16:24.336 for customers to go on to reversion rates for quite a while. 303 00:16:24.376 --> 00:16:26.880 And that difference has been there. 304 00:16:26.920 --> 00:16:30.350 There were periods where SVRs and fixed rates were similar, 305 00:16:30.390 --> 00:16:35.097 like back in 2009, but it's pretty rare. 306 00:16:35.137 --> 00:16:37.800 And we would expect, let's say a lot of, 307 00:16:37.840 --> 00:16:42.610 a lot of remortgaging and product switches to happen over time. 308 00:16:42.650 --> 00:16:45.430 Generally, SVRs are about 3% over base 309 00:16:45.470 --> 00:16:49.360 is what we've seen on average in the past. 310 00:16:49.400 --> 00:16:52.200 And then maybe just a final slide from me, 311 00:16:53.370 --> 00:16:55.720 you know, to put my cards on the table 312 00:16:55.760 --> 00:17:00.000 about where at least the market would imply our mortgage rates to go. 313 00:17:00.040 --> 00:17:02.377 One other thing that we've heard a lot of talk about 314 00:17:02.417 --> 00:17:04.430 over the last 6 to 12 months is, 315 00:17:04.470 --> 00:17:07.839 lenders pulling products very quickly, 316 00:17:07.879 --> 00:17:15.360 the frequency and number of mortgage rate changes has been baffling. 317 00:17:15.883 --> 00:17:18.460 It's been really tough, I think, both for lenders 318 00:17:18.500 --> 00:17:21.891 and especially for intermediaries and ultimately for your customers, 319 00:17:21.931 --> 00:17:27.120 to deal with the rate of change of mortgage rates. 320 00:17:27.160 --> 00:17:30.230 And I think some of that we probably need to all take away as an industry 321 00:17:30.270 --> 00:17:33.803 and think about how we can do that better. 322 00:17:34.236 --> 00:17:39.270 Clear disclosure of when rates are going to be pulled is obviously one thing, 323 00:17:39.310 --> 00:17:43.880 but, you know, is the market quick enough and efficient enough 324 00:17:43.920 --> 00:17:48.050 and how we do this, I think is a question we should all be asking ourselves. 325 00:17:48.676 --> 00:17:52.780 And maybe there's a digital solution for improving that over time. 326 00:17:52.820 --> 00:17:56.560 Clearly the sourcing systems are improving a lot 327 00:17:56.600 --> 00:17:59.956 and are a lot quicker to change than they used to be. 328 00:17:59.996 --> 00:18:02.390 But if you look on the left-hand side there, 329 00:18:02.430 --> 00:18:04.084 mortgage rates definitely moved up quicker, 330 00:18:04.124 --> 00:18:07.640 which is that bright yellow line at the top. 331 00:18:07.680 --> 00:18:10.543 And you can see there in late 2022, 332 00:18:10.583 --> 00:18:13.780 Liz Truss time, mortgage rates ramped up but fixed rate bonds, 333 00:18:13.820 --> 00:18:17.710 so this is savings products, also picked up quite quickly. 334 00:18:17.750 --> 00:18:23.477 Instant access savings have been slower and have finally reached about 2%. 335 00:18:23.517 --> 00:18:26.440 But you can see there that fixed rate bonds and mortgages 336 00:18:26.480 --> 00:18:30.220 have ended up at pretty much the same level there, at around, 337 00:18:30.260 --> 00:18:34.010 I think this was sort of as of the end of October 23rd, 338 00:18:34.050 --> 00:18:36.990 have stabilised at around the same level. 339 00:18:37.030 --> 00:18:39.130 And if you look on the right-hand side there, 340 00:18:39.170 --> 00:18:43.080 you can see the difference between the two. 341 00:18:43.120 --> 00:18:46.630 And this is almost a measure of sort of bank profitability. 342 00:18:46.670 --> 00:18:48.330 And really, to answer the question, 343 00:18:48.370 --> 00:18:51.197 are banks making loads of money out of mortgages? 344 00:18:51.237 --> 00:18:54.370 And the answer is, well, not as much as you might think, 345 00:18:54.410 --> 00:18:57.150 because if we look at, for instance, 346 00:18:57.190 --> 00:19:00.380 the green line on the right-hand side here, 347 00:19:00.420 --> 00:19:02.740 this is a difference between the two-year mortgage rate 348 00:19:02.780 --> 00:19:04.600 and the two-year savings rate. 349 00:19:04.640 --> 00:19:07.860 And you can see that that's actually as low as it's ever been. 350 00:19:07.900 --> 00:19:10.660 And that difference between where banks or lenders borrow money 351 00:19:10.700 --> 00:19:13.738 and where they lend it out is a sort of a measure 352 00:19:13.778 --> 00:19:18.841 of their profitability before expenses and tax. 353 00:19:18.881 --> 00:19:23.934 And so whether they're borrowing in two-year savings or two-year cash ISAs, 354 00:19:23.974 --> 00:19:27.719 they're paying a rate that's not far off their mortgages, 355 00:19:27.759 --> 00:19:30.837 maybe slightly better if you've got a big book of instant access 356 00:19:30.877 --> 00:19:32.730 or current accounts 357 00:19:32.770 --> 00:19:34.980 like a lot of the high street lenders do, 358 00:19:35.020 --> 00:19:41.006 but they are still seeing the margin is not as wide as it was, 359 00:19:41.046 --> 00:19:43.830 but it is coming down rapidly as well. 360 00:19:43.870 --> 00:19:48.513 So, I think the ability for mortgage lenders generally 361 00:19:48.553 --> 00:19:54.566 to cut margins from this point or to cut rates is only likely to happen 362 00:19:54.606 --> 00:19:56.690 if we also see a drop in savings rates. 363 00:19:56.730 --> 00:20:02.063 So maybe another area to keep an eye on is if you see savings rates dropping, 364 00:20:02.103 --> 00:20:04.471 it's probably a sign that there's some room for the lenders 365 00:20:04.511 --> 00:20:07.440 to drop their mortgage rates a bit 366 00:20:07.480 --> 00:20:10.350 and perhaps push them down closer to the swap rate. 367 00:20:10.760 --> 00:20:11.950 I've covered quite a lot there, Sian. 368 00:20:11.990 --> 00:20:14.531 So, hopefully I've given us a little bit of an indication 369 00:20:14.571 --> 00:20:18.639 of what might happen, which I think is positive for you. 370 00:20:18.679 --> 00:20:19.438 Yeah. 371 00:20:19.478 --> 00:20:23.710 But there's certainly some risk on the horizon, 372 00:20:23.750 --> 00:20:25.600 certainly the Middle East, I didn't touch on that, 373 00:20:25.640 --> 00:20:29.760 but that certainly could provide some pressure on inflation. 374 00:20:29.800 --> 00:20:32.450 -So, fingers crossed. -Yeah. 375 00:20:32.490 --> 00:20:37.150 Brilliant. Thank you. Alex. Absolutely fabulous as ever. 376 00:20:37.190 --> 00:20:39.170 I'll probably describe this really poorly, 377 00:20:39.210 --> 00:20:43.963 but it is a lot more stable or stabler than it was last year. 378 00:20:44.003 --> 00:20:47.240 And, understanding in particular swaps 379 00:20:47.280 --> 00:20:51.650 and the correlation between swaps rates and lenders rates 380 00:20:51.690 --> 00:20:54.696 and what we might be predicting in particular in relation 381 00:20:54.736 --> 00:20:58.390 to the Bank of England rate, is incredibly useful, 382 00:20:58.430 --> 00:21:03.410 as we all try and navigate the year ahead and beyond. 383 00:21:03.450 --> 00:21:06.800 And your reference also to the global stage and environment 384 00:21:06.840 --> 00:21:10.020 in which we're operating, is really well made. 385 00:21:10.060 --> 00:21:14.070 I think it's a sign of the level of volatility and how there are things, 386 00:21:14.110 --> 00:21:15.680 as much as you would love your crystal ball, 387 00:21:15.720 --> 00:21:18.730 there are sadly things that can come left field, 388 00:21:18.770 --> 00:21:22.790 but we can definitely navigate with what we know and make decisions 389 00:21:22.830 --> 00:21:25.720 because I'm going to remain optimistic, 390 00:21:25.760 --> 00:21:30.620 and predict that we'll have a more positive and a stabler market in 2024. 391 00:21:30.660 --> 00:21:34.480 I'm going to come to Rob now, if I may. 392 00:21:34.520 --> 00:21:37.590 -Hi, Rob. Very warm welcome again. -Hi. 393 00:21:38.096 --> 00:21:41.090 You're the author behind the IMLA report 394 00:21:41.130 --> 00:21:44.240 that was published only at the back end of last year, 395 00:21:44.280 --> 00:21:51.660 suitably entitled "The New Normal: Prospects for 2024 and 2025". 396 00:21:51.700 --> 00:21:55.456 Alex talking there about maybe it's a return to normal. 397 00:21:55.496 --> 00:21:57.210 It does feel to me more like a new normal. 398 00:21:57.250 --> 00:22:00.530 I can't imagine the dizzy heights of the low interest rates 399 00:22:00.570 --> 00:22:03.180 that feel like a long, long memory 400 00:22:03.220 --> 00:22:05.276 and a long time ago. 401 00:22:05.316 --> 00:22:07.570 But even since the report was published, 402 00:22:07.610 --> 00:22:10.130 I'm conscious that things have moved again. 403 00:22:10.170 --> 00:22:13.120 Another signal that it's really, really tough to predict. 404 00:22:13.160 --> 00:22:16.950 So, we'd love to get your perspective on what's going on 405 00:22:16.990 --> 00:22:19.540 and what's your outlook for the rest of the year. 406 00:22:19.580 --> 00:22:20.837 Thanks, Rob. 407 00:22:20.877 --> 00:22:23.980 Thanks. Thanks, Sian. That's a great introduction. 408 00:22:24.020 --> 00:22:27.020 And thanks, Alex, for a really, really interesting exposition 409 00:22:27.060 --> 00:22:31.290 of what's happening with mortgage rates and other interest rates. 410 00:22:32.063 --> 00:22:33.780 Yes, I write the IMLA research 411 00:22:33.820 --> 00:22:38.260 and at the end of every year I put out a much anticipated forecast. 412 00:22:38.300 --> 00:22:40.431 The only people who really forecast the mortgage market 413 00:22:40.471 --> 00:22:43.030 are ourselves and UK Finance. 414 00:22:43.070 --> 00:22:46.800 So it was always interesting to see how the two forecasts compare. 415 00:22:46.840 --> 00:22:48.560 Anyway, the background is I mean, 416 00:22:48.600 --> 00:22:51.360 I agree we've had, things have settled down. 417 00:22:51.400 --> 00:22:56.030 And if we look at the first slide, you can see that we've settled down 418 00:22:56.070 --> 00:22:57.750 from a very turbulent period. 419 00:22:57.790 --> 00:23:00.998 I can't remember probably in my adult life, quite as many shocks 420 00:23:01.038 --> 00:23:03.460 coming quite as quickly as the ones we've seen recently. 421 00:23:03.500 --> 00:23:07.770 We had Covid, followed by the massive supply disruption 422 00:23:07.810 --> 00:23:12.250 that came out when the economies of the world opened up again from Covid, 423 00:23:12.290 --> 00:23:13.570 which you can see on this graph, 424 00:23:13.610 --> 00:23:18.070 is what sent global commodity prices spiking very significantly. 425 00:23:18.110 --> 00:23:21.290 You know, as the global economy got back to work. 426 00:23:21.330 --> 00:23:25.020 Then we saw the Russian invasion of Ukraine. 427 00:23:25.060 --> 00:23:28.676 And then in the UK, we also, of course, had the now rather infamous 428 00:23:28.716 --> 00:23:33.042 2022 autumn mini budget. 429 00:23:33.082 --> 00:23:35.997 All of these shocks have hit the UK economy 430 00:23:36.037 --> 00:23:38.490 and of course, the housing and mortgage markets. 431 00:23:38.530 --> 00:23:41.360 But I have to say, if you went back a couple of years 432 00:23:41.400 --> 00:23:44.940 and you... 2 or 3 years, and you told someone 433 00:23:44.980 --> 00:23:48.810 that the economy was going to be hit by all these shocks, 434 00:23:48.850 --> 00:23:51.620 I think they would have expected the economy 435 00:23:51.660 --> 00:23:55.420 and the housing market to be in far worse shape than it is, frankly. 436 00:23:55.823 --> 00:23:57.640 So, the optimistic point of view 437 00:23:57.680 --> 00:24:00.510 is we've come through this in pretty good shape, 438 00:24:00.550 --> 00:24:03.800 considering how much the economy has been buffeted 439 00:24:03.840 --> 00:24:08.320 by really important global shocks. 440 00:24:08.360 --> 00:24:10.860 And as you can see, the impact on the UK economy 441 00:24:10.900 --> 00:24:16.550 has been particularly through the import prices in food and energy. 442 00:24:16.590 --> 00:24:20.170 And if we move on to the next slide, we can see that impact 443 00:24:20.210 --> 00:24:23.330 and how the authorities - not just the authorities, 444 00:24:23.370 --> 00:24:25.490 but every pretty much every forecaster really, 445 00:24:25.530 --> 00:24:28.630 bar a few, failed really to understand the impact 446 00:24:28.670 --> 00:24:32.460 that that would have on the economy or particularly on inflation. 447 00:24:32.500 --> 00:24:35.570 So this is another chart taken from the New Normal Report. 448 00:24:35.610 --> 00:24:37.484 This is the government's official forecast 449 00:24:37.524 --> 00:24:39.850 done by the Office of Budget Responsibility. 450 00:24:39.890 --> 00:24:42.030 And if you look at the blue line that was their forecast 451 00:24:42.070 --> 00:24:46.890 for inflation, CPI inflation, back in October 2021. 452 00:24:46.930 --> 00:24:50.220 As you can see, they were not expecting inflation to get very high. 453 00:24:50.260 --> 00:24:52.866 They were expecting it to glide back to, 454 00:24:52.906 --> 00:24:59.210 comfortably back to 2% by early 2024 where we are now. 455 00:24:59.250 --> 00:25:01.920 Then if you look at the purple line, that's the the out-turn. 456 00:25:01.960 --> 00:25:04.469 You see this huge spike in inflation 457 00:25:04.509 --> 00:25:08.730 that we, of course, had following those shocks. 458 00:25:08.770 --> 00:25:14.617 If you then look at the red line, that was the OBR's November 2022 forecast. 459 00:25:14.657 --> 00:25:17.000 They had inflation falling really quickly 460 00:25:17.040 --> 00:25:23.760 and actually turning negative by this year surprisingly, 461 00:25:23.800 --> 00:25:26.050 if you look at their latest forecasts from last autumn, 462 00:25:26.090 --> 00:25:29.220 which is the green line, you can see they're now much more careful 463 00:25:29.260 --> 00:25:32.020 about how quickly inflation is going to come down. 464 00:25:32.060 --> 00:25:36.250 So, the government didn't anticipate how quickly inflation 465 00:25:36.290 --> 00:25:38.150 or how much inflation would rise. 466 00:25:38.190 --> 00:25:42.800 And then they also didn't anticipate how sticky inflation has been. 467 00:25:42.840 --> 00:25:47.680 And I think that's an important theme that I would pick up, that we believe, 468 00:25:47.720 --> 00:25:51.324 in the IMLA forecast, that inflation is quite sticky 469 00:25:51.364 --> 00:25:54.710 and inflation has moved from those import price effects, 470 00:25:54.750 --> 00:25:58.310 through energy and food increasingly into services. 471 00:25:58.763 --> 00:26:01.256 But I'll come back to that later. 472 00:26:01.296 --> 00:26:04.320 Moving onto the next slide. 473 00:26:04.360 --> 00:26:05.940 What about the impact of all of this 474 00:26:05.980 --> 00:26:08.560 on the housing market and the mortgage market? 475 00:26:08.600 --> 00:26:10.350 Well, this is the impact on the housing market. 476 00:26:10.390 --> 00:26:14.890 Of course, we had that incredible post-Covid boom, 477 00:26:15.383 --> 00:26:18.036 sparked partly by the so-called 478 00:26:18.076 --> 00:26:21.550 "race for space" as people re-evaluated where they wanted to live. 479 00:26:21.590 --> 00:26:25.930 But I think far more importantly, by the huge fiscal and monetary relaxation 480 00:26:25.970 --> 00:26:30.160 that took place, government essentially pumped very large sums of money, 481 00:26:30.200 --> 00:26:33.330 some £300 billion into the economy 482 00:26:33.370 --> 00:26:38.620 to keep it afloat in the Covid lockdown period. 483 00:26:38.660 --> 00:26:41.390 And a lot of that money seeped into the housing market 484 00:26:41.430 --> 00:26:47.120 and it pushed house price inflation up to double-digit levels. 485 00:26:47.763 --> 00:26:50.480 Then, of course, interest rates started to rise, 486 00:26:50.520 --> 00:26:53.490 perhaps arguably somewhat belatedly, from late 2021, 487 00:26:53.530 --> 00:26:56.540 the Bank of England realised that interest rates were too low, 488 00:26:56.580 --> 00:27:01.030 that monetary conditions were too soft, too relaxed, 489 00:27:01.070 --> 00:27:05.540 and interest rates started to rise and forecasters 490 00:27:05.580 --> 00:27:09.610 pretty quickly started to talk about some quite serious falls in house prices. 491 00:27:09.650 --> 00:27:11.750 Many, many forecasters, including the OBR, 492 00:27:11.790 --> 00:27:13.550 had quite significant falls in house prices. 493 00:27:13.590 --> 00:27:17.070 I was a bit sceptical about the idea that they'd fall rapidly, 494 00:27:17.110 --> 00:27:20.540 but even our forecast had house prices falling. 495 00:27:21.117 --> 00:27:25.097 House prices, of course, did soften last year. 496 00:27:25.137 --> 00:27:28.960 But what's interesting is when you look at the latest numbers from last autumn, 497 00:27:29.000 --> 00:27:30.560 heading up to the end of last year, 498 00:27:30.600 --> 00:27:33.860 is that they actually really began to stabilise. 499 00:27:33.900 --> 00:27:35.570 And I mean, this is the 12-month increase. 500 00:27:35.610 --> 00:27:38.210 But if you look at the more contemporaneous measures 501 00:27:38.250 --> 00:27:42.070 like 3 months on 3 months, some measures are actually now up. 502 00:27:42.110 --> 00:27:44.180 So, house prices probably, 503 00:27:44.677 --> 00:27:48.670 you could describe now as being either stable or maybe slightly up. 504 00:27:48.710 --> 00:27:53.537 Now, when you consider where base rate is, 5.25%, 505 00:27:53.577 --> 00:27:55.940 compared to where it has been, as Alex was saying, 506 00:27:55.980 --> 00:27:59.120 for that extended period when it was ultra low, 507 00:27:59.160 --> 00:28:01.200 again, I think most people would be surprised. 508 00:28:01.240 --> 00:28:02.890 Certainly, most economists would be surprised 509 00:28:02.930 --> 00:28:04.990 that the housing market has been this robust 510 00:28:05.737 --> 00:28:08.860 in the face of interest rates at this level. 511 00:28:09.410 --> 00:28:12.070 And I think part of the reason if we're saying, 512 00:28:12.110 --> 00:28:13.970 well, what is the reason for that is, 513 00:28:14.010 --> 00:28:17.140 well, partly we still have some of an overhang of, 514 00:28:17.180 --> 00:28:19.650 of cash from the Covid injection from government. 515 00:28:19.690 --> 00:28:23.000 It hasn't all been unwound by any means. 516 00:28:23.040 --> 00:28:26.670 Although personal saving levels have started to fall. 517 00:28:26.710 --> 00:28:29.660 But also we have this structural factor in the UK, 518 00:28:29.700 --> 00:28:33.020 which is not unique to UK. You see many other countries where we, 519 00:28:33.060 --> 00:28:37.090 we have not built enough housing to cater for growing population, 520 00:28:37.130 --> 00:28:40.710 and the UK population has been going up quite significantly 521 00:28:40.750 --> 00:28:43.360 and you will have seen a lot of stuff in the press 522 00:28:43.400 --> 00:28:46.400 about net immigration at record levels. 523 00:28:46.440 --> 00:28:50.020 So, we have record... and everybody has to have a place to live. 524 00:28:50.060 --> 00:28:53.410 So, a record demand for housing, either rented or owner occupied. 525 00:28:53.450 --> 00:28:58.010 And this is keeping house prices relatively buoyant. 526 00:28:58.050 --> 00:29:02.680 Now, if we look at the next slide, we can see housing turnover in a slump. 527 00:29:02.720 --> 00:29:05.380 Housing turnover is usually the first thing thing to fall. 528 00:29:05.420 --> 00:29:08.330 You know, people who are looking to sell their houses 529 00:29:08.370 --> 00:29:11.870 often have an idea of what they're worth and don't want to take a big cut. 530 00:29:11.910 --> 00:29:14.450 What we see from this graph is, obviously there was 531 00:29:14.490 --> 00:29:19.880 the very abnormal reduction during the Covid period, during lockdown, 532 00:29:19.920 --> 00:29:23.400 but then a very big boom afterwards because of government incentivised 533 00:29:23.440 --> 00:29:29.470 housing transactions with stamp duty holidays. 534 00:29:30.157 --> 00:29:33.340 And then in 2022, the market continued to be buoyant. 535 00:29:33.380 --> 00:29:38.523 But as soon as you got to the period of the mini budget in autumn 2022, 536 00:29:38.563 --> 00:29:43.070 as we all know, and I'm sure that you're watching more even than I 537 00:29:43.110 --> 00:29:44.640 being at the sharp end. 538 00:29:44.680 --> 00:29:48.920 We saw a huge increase in fixed rate mortgages 539 00:29:48.960 --> 00:29:51.490 and the mortgage market taking a real battering. 540 00:29:51.530 --> 00:29:55.010 And yes, it impacted transactions quite significantly. 541 00:29:55.050 --> 00:29:59.400 But again, if you look at where we got to by the end of 2023, 542 00:29:59.440 --> 00:30:01.320 housing transactions are rising again. 543 00:30:01.360 --> 00:30:05.010 They're actually above the level they were in the early part of 2019 544 00:30:05.050 --> 00:30:08.170 before the Covid pandemic. 545 00:30:08.210 --> 00:30:12.670 So, even housing transaction levels actually are in reasonably good shape, 546 00:30:12.710 --> 00:30:15.960 I would say, going into 2024. 547 00:30:16.000 --> 00:30:19.172 So I mean, all of that sounds fairly rosy. 548 00:30:19.212 --> 00:30:22.265 If we press on to the next slide, 549 00:30:22.305 --> 00:30:25.590 let's look at how that impacts on the mortgage market itself. 550 00:30:25.630 --> 00:30:28.657 So, this is gross mortgage lending 551 00:30:28.697 --> 00:30:32.003 looking at for house purchase and remortgage. 552 00:30:32.043 --> 00:30:36.979 And what you see is that again, you see the very clear impact 553 00:30:37.019 --> 00:30:43.077 from that mini budget in autumn 2021 impacted the... 554 00:30:43.117 --> 00:30:48.085 Autumn 2022 impacted the market and sent mortgage lending down 555 00:30:48.125 --> 00:30:51.290 really, really sharply in the early part of last year. 556 00:30:51.330 --> 00:30:55.180 But again, a recovery started to happen in the latter part of last year. 557 00:30:55.220 --> 00:30:59.050 We still don't have the full Q4 numbers. 558 00:30:59.090 --> 00:31:01.180 But I'd anticipate they would be, 559 00:31:01.220 --> 00:31:04.400 we think there would be roughly in line with Q3. 560 00:31:05.537 --> 00:31:08.240 So, what that again suggests is that the market, 561 00:31:08.280 --> 00:31:11.400 despite all these shocks through recent years, 562 00:31:11.440 --> 00:31:13.890 and particularly despite high interest rates, 563 00:31:13.930 --> 00:31:16.920 which is always a key factor for the housing market, 564 00:31:16.960 --> 00:31:19.860 it is an interest rate sensitive sector of the economy, 565 00:31:19.900 --> 00:31:22.180 the housing market and the mortgage market. 566 00:31:22.220 --> 00:31:25.650 You would expect higher interest rates to reduce house prices 567 00:31:25.690 --> 00:31:28.290 and to reduce mortgage activity. 568 00:31:28.330 --> 00:31:32.390 Despite all that, the market has recovered from these shocks. 569 00:31:32.430 --> 00:31:37.960 And let's not forget, of course, bank rate at 5.25% hasn't come down at all. 570 00:31:38.000 --> 00:31:40.870 Fixed rate mortgage pricing, of course, has come down 571 00:31:40.910 --> 00:31:44.900 quite significantly in recent months, and that's great news for borrowers. 572 00:31:44.940 --> 00:31:49.110 But bank rate is still at these relatively high levels by recent history. 573 00:31:49.150 --> 00:31:52.490 And yet the mortgage market again also seems to have stabilised 574 00:31:52.530 --> 00:31:55.160 rather like the housing market. 575 00:31:55.200 --> 00:31:57.960 Obviously not at high levels 576 00:31:58.000 --> 00:32:00.260 compared to where we have been in recent years, 577 00:32:00.300 --> 00:32:03.340 but looks like there's a recovery going on. 578 00:32:03.380 --> 00:32:06.916 So, all that looks fairly optimistic. 579 00:32:06.956 --> 00:32:10.090 So, if you then look at the next slide, you might be, 580 00:32:10.130 --> 00:32:13.600 wondering what is the impact of all of this on affordability, 581 00:32:13.640 --> 00:32:14.820 mortgage affordability. 582 00:32:14.860 --> 00:32:17.850 And these are numbers from UK Finance 583 00:32:17.890 --> 00:32:21.800 who look at the mortgage interest payments for new borrowers, 584 00:32:21.840 --> 00:32:26.630 both first time buyers and home movers, as a proportion of their income. 585 00:32:26.670 --> 00:32:30.960 And you can see the, I think as Alex mentioned back in the late 80s, 586 00:32:31.000 --> 00:32:36.470 early 90s, that huge spike that coincided with base rate reaching 15%, 587 00:32:36.510 --> 00:32:38.640 you know, real pain in the mortgage market. 588 00:32:38.680 --> 00:32:42.060 And it led to many, many customers falling into arrears. 589 00:32:42.100 --> 00:32:45.080 We've obviously had this much more benign period since then, 590 00:32:45.120 --> 00:32:47.540 and particularly since the global financial crisis, 591 00:32:47.580 --> 00:32:52.680 we've actually had, ironically, record levels of affordability. 592 00:32:53.643 --> 00:32:57.810 Which seems odd given that everyone talks about how unaffordable housing is. 593 00:32:57.850 --> 00:33:01.300 The level of house prices relative to income 594 00:33:01.340 --> 00:33:04.730 has been at record levels, but because mortgage rates have been so low 595 00:33:04.770 --> 00:33:07.010 that when you translate that into the amount people 596 00:33:07.050 --> 00:33:11.030 are actually paying on their mortgage as a percentage of their income, 597 00:33:11.070 --> 00:33:13.000 it's been at a record low. 598 00:33:13.040 --> 00:33:16.890 Of course, all that's begun to change now with higher interest rates. 599 00:33:16.930 --> 00:33:18.780 But what you do see, looking at this chart, 600 00:33:18.820 --> 00:33:21.450 which goes up to last year, 601 00:33:21.490 --> 00:33:24.340 as much of the data from last year as we have available, 602 00:33:24.380 --> 00:33:27.870 you'll see that actually the red line, which is home movers, 603 00:33:27.910 --> 00:33:31.210 people who are moving home. i.e. non-first time buyers, 604 00:33:31.250 --> 00:33:36.504 their affordability is actually better than the average of this whole period. 605 00:33:36.544 --> 00:33:40.220 It's still more affordable than it has been generally in the past, 606 00:33:40.260 --> 00:33:44.870 although not as good obviously as the history of the last ten years or so. 607 00:33:44.910 --> 00:33:48.170 If you look at first home buyers, actually it is a little bit more difficult. 608 00:33:48.210 --> 00:33:51.180 They are now above the long-term average in terms of how much 609 00:33:51.220 --> 00:33:54.070 they're spending on their mortgage as a proportion of their income, 610 00:33:54.110 --> 00:33:57.280 and I think that does show that a lot of first time buyers 611 00:33:57.320 --> 00:34:02.450 are struggling in this higher interest rate environment to make the numbers work. 612 00:34:02.490 --> 00:34:05.570 And obviously, brokers will know how much that's the case 613 00:34:05.610 --> 00:34:09.140 that many first time buyers are indeed finding it difficult. 614 00:34:10.290 --> 00:34:12.420 So, that's the sort of background in the market. 615 00:34:12.460 --> 00:34:17.540 What about our forecast? Moving on to what we see happening? 616 00:34:19.960 --> 00:34:23.670 Given that you will have thought that what I've said is relatively optimistic, 617 00:34:23.710 --> 00:34:27.460 you might be surprised to see that for the forecast period 618 00:34:27.500 --> 00:34:32.583 we're actually not that optimistic about where gross lending will be this year, 619 00:34:32.623 --> 00:34:34.860 a little bit more so in 2025. 620 00:34:34.900 --> 00:34:38.790 You'll notice that the blue line gross lending does come down. 621 00:34:38.830 --> 00:34:40.030 The red line is net lending. 622 00:34:40.070 --> 00:34:45.260 So that's effectively the increase in the amount of mortgage debt out there. 623 00:34:45.300 --> 00:34:49.540 And that actually really fell very sharply in 2023. 624 00:34:49.983 --> 00:34:52.220 And probably it was the most surprising number. 625 00:34:52.260 --> 00:34:55.820 It doesn't really matter much if your mortgage broker in a way directly 626 00:34:55.860 --> 00:35:00.690 because you're involved with the gross lending end of the market. 627 00:35:00.730 --> 00:35:01.510 But net lending, 628 00:35:01.550 --> 00:35:06.070 which is telling you how much in aggregate mortgage lending is growing, 629 00:35:06.110 --> 00:35:11.610 was in 2023, on our estimate, one of the lowest numbers ever recorded. 630 00:35:12.836 --> 00:35:16.040 So, and we expect that to continue to be an issue in 2024 631 00:35:16.080 --> 00:35:18.680 and I'll come back to that shortly. 632 00:35:19.283 --> 00:35:23.450 But why are we fairly cautious or pessimistic about this year? 633 00:35:23.490 --> 00:35:28.880 And it comes back to this issue about inflation, 634 00:35:28.920 --> 00:35:31.050 which, as I was saying earlier, 635 00:35:31.090 --> 00:35:34.830 and Alex mentioned it as well, inflation has been relatively sticky. 636 00:35:34.870 --> 00:35:39.470 And if you look at the December inflation CPI number, 637 00:35:39.510 --> 00:35:43.020 what you saw was having had a very good number in November, 638 00:35:43.060 --> 00:35:46.763 inflation went up slightly in December to 4% headline rate, 639 00:35:46.803 --> 00:35:49.916 sounds high. But has come down a lot. 640 00:35:49.956 --> 00:35:52.080 But it's when you scratch under the skin a bit 641 00:35:52.120 --> 00:35:55.400 and you look at for example, core inflation in the UK 642 00:35:55.440 --> 00:36:01.120 that is stripping out the more volatile elements of inflation, it's 5.1%. 643 00:36:01.160 --> 00:36:05.120 And services inflation went from 6.3 to 6.4%. 644 00:36:05.160 --> 00:36:08.420 So what we've seen is inflation which was an imported phenomenon, 645 00:36:08.460 --> 00:36:12.300 you know, as gas prices and fuel prices rose, 646 00:36:12.340 --> 00:36:16.540 food prices rose, has become more embedded in the domestic economy. 647 00:36:16.580 --> 00:36:19.730 And you can see this if you look at where wages have been going up, 648 00:36:19.770 --> 00:36:22.890 they've been going up very, very steep rates, 7-8%. 649 00:36:22.930 --> 00:36:26.890 That's now come down to a level which is below seven, 650 00:36:26.930 --> 00:36:29.400 but we're still above 6% wage inflation. 651 00:36:29.440 --> 00:36:32.830 The government has announced a 10% increase in the minimum wage, 652 00:36:32.870 --> 00:36:35.720 which will take effect in April. 653 00:36:35.760 --> 00:36:39.260 So many businesses will find that they're having to pay staff more, 654 00:36:39.300 --> 00:36:41.240 and they are having to pass those costs on 655 00:36:41.280 --> 00:36:44.770 because there's almost no productivity growth in the UK economy. 656 00:36:44.810 --> 00:36:49.000 This is a long-term problem we've had, and it's not unique to the UK, 657 00:36:49.040 --> 00:36:52.370 but basically productivity growth has been roughly zero. 658 00:36:52.410 --> 00:36:55.500 So, if you have to pay your workers 6% more, 659 00:36:55.540 --> 00:36:58.320 you really have to pass that on to customers 660 00:36:58.360 --> 00:37:00.850 because you can't find it in productivity improvements 661 00:37:00.890 --> 00:37:04.050 because they're very hard to find. 662 00:37:04.090 --> 00:37:07.640 And so, we're cautious that the Bank of England 663 00:37:07.680 --> 00:37:11.410 will not want to cut bank rate quickly. 664 00:37:12.360 --> 00:37:17.250 We'll actually wait and want to see what's happening to core inflation, 665 00:37:17.290 --> 00:37:19.690 want to see services inflation coming down. 666 00:37:19.730 --> 00:37:22.920 However, as Alex mentioned, there is a school of thought out there now, 667 00:37:22.960 --> 00:37:26.260 a group of economists who believe that headline CPI inflation 668 00:37:26.300 --> 00:37:28.800 could come down to 2%, 669 00:37:28.840 --> 00:37:32.630 by the summer or maybe even earlier because of falling energy prices. 670 00:37:32.670 --> 00:37:36.180 And if that does happen, actually we could be wrong. 671 00:37:36.220 --> 00:37:40.970 And the bank rate or base rate will fall this year, 672 00:37:41.010 --> 00:37:43.910 maybe even in the first half of this year. 673 00:37:43.950 --> 00:37:46.490 And if that is true, actually, you know, 674 00:37:46.530 --> 00:37:50.040 our forecast would be significantly more optimistic. 675 00:37:50.080 --> 00:37:52.980 I would say we'd be forecasting house prices 676 00:37:53.020 --> 00:37:57.580 will continue to rise this year if bank rate falls 677 00:37:57.620 --> 00:38:04.370 and that, this blue line here for 2024 would probably be up on 2023, not down. 678 00:38:04.410 --> 00:38:08.930 So, where inflation is heading this year is really a critical issue 679 00:38:09.743 --> 00:38:12.740 in terms of where the housing and mortgage markets are going to go, 680 00:38:12.780 --> 00:38:15.477 we've been cautious. 681 00:38:15.517 --> 00:38:18.060 But who knows what way it'll go. 682 00:38:18.100 --> 00:38:19.980 I mean, the biggest issue, 683 00:38:20.020 --> 00:38:23.130 I guess, is that there are some geopolitical concerns out there 684 00:38:23.170 --> 00:38:27.990 that could flare up and send a lot of those commodity prices back up. 685 00:38:28.030 --> 00:38:32.470 But our concern is more about how quickly inflation in the domestic economy 686 00:38:32.510 --> 00:38:35.660 will recede, given that unemployment is still very low 687 00:38:35.700 --> 00:38:39.700 and employers are still finding it difficult to hire staff. 688 00:38:39.740 --> 00:38:43.400 It seems to me that it won't be very quick to see, 689 00:38:43.440 --> 00:38:46.610 we won't be quick to see wage prices coming back down 690 00:38:46.650 --> 00:38:49.580 to the sorts of levels we got used to in the past. 691 00:38:49.620 --> 00:38:53.480 So wage rises are 5-6%. If they become embedded, 692 00:38:53.520 --> 00:38:56.330 are simply not consistent with 2% inflation, 693 00:38:56.370 --> 00:39:00.330 and therefore the Bank of England will have to wait 694 00:39:00.370 --> 00:39:02.203 and keep interest rates high. 695 00:39:03.960 --> 00:39:07.580 So, those are the sort of structural, cyclical factors we see. 696 00:39:07.620 --> 00:39:09.540 But if you go on to the next slide, 697 00:39:09.580 --> 00:39:13.660 I did want to just finish with a couple of... 698 00:39:13.700 --> 00:39:17.280 A couple of slides about a sort of structural background that's taking place. 699 00:39:17.320 --> 00:39:19.470 I think it's important for everyone in the mortgage market 700 00:39:19.510 --> 00:39:21.610 to think about and understand. 701 00:39:21.650 --> 00:39:25.610 This slide shows the number of mortgage properties, 702 00:39:25.650 --> 00:39:29.400 the change in the number of mortgage properties since 2009. 703 00:39:29.440 --> 00:39:32.240 And what you'll see is that for a long period of time, 704 00:39:32.280 --> 00:39:36.870 the number of mortgages held by owner occupiers has been declining, 705 00:39:36.951 --> 00:39:41.295 and it's been declining quite sharply, in fact, quite a lot. 706 00:39:43.600 --> 00:39:47.100 Whereas a number of buy-to-let mortgages has been going up. 707 00:39:47.140 --> 00:39:49.990 What was interesting and maybe unique about last year 708 00:39:50.030 --> 00:39:52.100 was that we think for the first time, 709 00:39:52.140 --> 00:39:57.390 both the number of owner occupied and buy-to-let mortgages actually fell. 710 00:39:57.430 --> 00:39:59.880 Now, the reason why the number of owner occupied mortgages 711 00:39:59.920 --> 00:40:03.380 has been falling is really essentially about demographics 712 00:40:03.420 --> 00:40:07.640 and the difficulties first time buyers have getting on the housing ladder. 713 00:40:07.680 --> 00:40:11.910 So owner occupation is quite concentrated 714 00:40:11.950 --> 00:40:15.290 amongst older age groups, people in their 50s and 60s, 715 00:40:15.330 --> 00:40:19.070 the baby boomers, and many of them are now coming to the age 716 00:40:19.110 --> 00:40:21.070 where they're paying their mortgage off. 717 00:40:21.110 --> 00:40:23.290 They're reaching their final mortgage payment, 718 00:40:23.330 --> 00:40:24.470 becoming mortgage free. 719 00:40:24.510 --> 00:40:28.560 And that's what's driving that decrease in the number 720 00:40:28.600 --> 00:40:30.060 of owner-occupied mortgages. 721 00:40:30.100 --> 00:40:34.500 At the same the floods of new owner occupiers, 722 00:40:34.540 --> 00:40:38.960 you see coming in first time buyers that we used to see, isn't happening. 723 00:40:39.000 --> 00:40:41.710 The numbers have been much lower than in the past. 724 00:40:41.750 --> 00:40:45.630 As we all know, many younger people struggling to get into the housing market. 725 00:40:45.670 --> 00:40:47.260 And that, of course, has driven the increase 726 00:40:47.300 --> 00:40:49.820 in the number of buy-to-let mortgages. 727 00:40:49.860 --> 00:40:53.216 But even that market has been hit recently 728 00:40:53.256 --> 00:40:56.363 as buy-to-let borrowers have had their own issues 729 00:40:56.403 --> 00:40:57.900 and concerns about affordability, 730 00:40:57.940 --> 00:41:01.880 and found it difficult often to remortgage properties 731 00:41:01.920 --> 00:41:03.570 because mortgage rates are so much higher, 732 00:41:03.610 --> 00:41:07.510 exacerbated by tax changes which hit higher rate. 733 00:41:07.550 --> 00:41:10.400 Buy-to-let borrowers who are buying in their own name. 734 00:41:10.440 --> 00:41:13.097 And this is actually causing some buy-to-let investors 735 00:41:13.137 --> 00:41:14.790 to get out of the market. 736 00:41:14.830 --> 00:41:19.020 Which of course is exacerbating problems for potential first time buyers 737 00:41:19.060 --> 00:41:21.620 because their rents are going up quite sharply 738 00:41:21.660 --> 00:41:25.940 if they're in the private rented sector. 739 00:41:25.980 --> 00:41:31.340 And if we look at the final slide I wanted to show today, 740 00:41:32.320 --> 00:41:33.880 something people don't normally look at. 741 00:41:33.920 --> 00:41:36.570 So something a bit different, which is interesting, is if you work out 742 00:41:36.610 --> 00:41:41.570 the value or estimate of the value of total housing transactions, 743 00:41:41.610 --> 00:41:45.370 you'll see 2021 was a record year, we'd never had 744 00:41:45.410 --> 00:41:49.830 such a large amount of housing turnover, more than 350 billion. 745 00:41:49.870 --> 00:41:52.520 But what's interesting about this slide 746 00:41:52.560 --> 00:41:54.284 is not that it's fallen back since then. 747 00:41:54.324 --> 00:41:58.220 That's predictable as housing transactions have reduced. 748 00:41:58.260 --> 00:42:00.730 It's comparing the blue and the red bars. 749 00:42:00.770 --> 00:42:06.180 So the blue element is the amount of money paid in cash for those transactions. 750 00:42:06.220 --> 00:42:09.233 The red was the amount financed for mortgage debt. 751 00:42:09.273 --> 00:42:11.090 Now, if you compare 2006 752 00:42:11.130 --> 00:42:14.183 and look at the relative size of the blue and the red 753 00:42:14.223 --> 00:42:16.530 compared to 2023, 754 00:42:16.570 --> 00:42:20.560 what you see is this really significant increase in the amount of cash 755 00:42:20.600 --> 00:42:22.820 being used in these transactions, 756 00:42:22.860 --> 00:42:26.480 and a really significant decrease in the amount of mortgage debt. 757 00:42:26.520 --> 00:42:29.651 And I think this mirrors the, 758 00:42:29.691 --> 00:42:34.010 this effect of more and more homeowners paying off their mortgage. 759 00:42:34.050 --> 00:42:38.000 More and more of the housing stock is owned by people of an older age 760 00:42:38.040 --> 00:42:40.420 who no longer need a mortgage. 761 00:42:40.460 --> 00:42:42.660 And therefore, when they come to transact, 762 00:42:42.700 --> 00:42:46.458 more and more of those people are transacting in cash, 763 00:42:46.498 --> 00:42:48.172 obviously typically with down-sizers. 764 00:42:48.212 --> 00:42:51.737 But even people who are just moving due to moving jobs, 765 00:42:51.777 --> 00:42:53.120 if they're in the older age bracket, 766 00:42:53.160 --> 00:42:56.630 they will have accumulated a lot of equity. 767 00:42:56.670 --> 00:42:59.080 The positive message we can take from this, I think, 768 00:42:59.120 --> 00:43:03.460 and a really important message, is there is this huge reserve now, 769 00:43:03.500 --> 00:43:07.944 an unprecedented reserve of equity in the housing market. 770 00:43:07.984 --> 00:43:12.670 I estimate that the average LTV of the UK housing market is now about 23%, 771 00:43:12.710 --> 00:43:15.380 and it's never been lower in modern history. 772 00:43:15.420 --> 00:43:18.220 So there's this huge reserve of equity in the housing market 773 00:43:18.260 --> 00:43:22.960 which mortgage lenders and hopefully brokers can tap, 774 00:43:23.643 --> 00:43:26.910 particularly in the later life lending market. 775 00:43:27.803 --> 00:43:30.540 People are sitting on this large amount of equity, 776 00:43:30.580 --> 00:43:35.010 and I think many of them really could benefit themselves, 777 00:43:35.050 --> 00:43:37.320 benefit their lives from releasing some of that equity. 778 00:43:37.360 --> 00:43:42.170 So I think that will be an increasing focus of mortgage lenders into the future. 779 00:43:46.900 --> 00:43:51.080 Fantastic. Thank you. Rob. A masterclass. 780 00:43:51.120 --> 00:43:54.543 I've been scribbling away in the background here. 781 00:43:54.583 --> 00:43:58.210 I'm going to try and summarise it. I'm really conscious of time. 782 00:43:58.250 --> 00:43:59.585 We were going to explore... 783 00:43:59.625 --> 00:44:01.725 One of my questions I was going to put to you was, 784 00:44:01.765 --> 00:44:03.430 why is the housing market so resilient? 785 00:44:03.470 --> 00:44:08.280 And you covered that wonderfully. And that's sort of supply side effect, 786 00:44:08.320 --> 00:44:12.890 particularly given sort of population demographics was incredibly interesting. 787 00:44:12.930 --> 00:44:16.984 Also found really interesting the affordability point, but also 788 00:44:17.024 --> 00:44:20.311 quite how is that disproportionately impacting first time buyers 789 00:44:20.351 --> 00:44:25.730 who are so critical to the whole market moving with great context, 790 00:44:25.770 --> 00:44:28.820 I think I'm going to summarise now, if that's all right. 791 00:44:28.860 --> 00:44:30.790 I'm conscious it's Friday afternoon. 792 00:44:30.830 --> 00:44:33.710 You both kindly and generously giving your time 793 00:44:33.750 --> 00:44:38.310 and all of you listening in, I'm sure have got something out of this, 794 00:44:38.350 --> 00:44:41.763 but I'm going to end with... I've gone from giddy optimism 795 00:44:41.803 --> 00:44:45.430 to probably realistic, cautious optimism. 796 00:44:45.470 --> 00:44:49.200 It definitely feels like things are stabilising, 797 00:44:49.240 --> 00:44:52.240 but they're not going to return to the dizzy heights 798 00:44:52.280 --> 00:44:57.040 that we saw before 2023. 799 00:44:57.450 --> 00:44:59.990 I think I'm taking away from this some key indicators 800 00:45:00.030 --> 00:45:02.477 that we all will hopefully keep an eye on 801 00:45:02.517 --> 00:45:06.210 whether that's the swaps markets that you were talking about, Alex, 802 00:45:06.250 --> 00:45:13.600 and how they are predicting the outlook for 2024 and beyond. 803 00:45:13.640 --> 00:45:16.410 I think you described... You talked about inflation, Rob. 804 00:45:16.450 --> 00:45:19.260 So, how it's embedded in the domestic economy. 805 00:45:19.300 --> 00:45:22.570 So yes, we need to keep an eye on that inflationary print. 806 00:45:22.610 --> 00:45:26.100 But it's really the underlying detail in that data 807 00:45:26.140 --> 00:45:29.170 that is interesting to us in terms of how it will impact. 808 00:45:29.210 --> 00:45:32.160 And it's definitely the problem child that the Bank of England 809 00:45:32.200 --> 00:45:34.500 and the rest of us have been wrestling with. 810 00:45:34.540 --> 00:45:36.220 But it is on a downward trajectory. 811 00:45:36.260 --> 00:45:38.161 So I'm going to hang on to that. 812 00:45:38.201 --> 00:45:41.917 We're still predicting that will come down 813 00:45:41.957 --> 00:45:45.283 and correspondingly, base rate will. 814 00:45:45.323 --> 00:45:49.520 You talked about productivity and how that's really tough, 815 00:45:49.560 --> 00:45:54.250 particularly if the inflation problem is more domestic than imported. 816 00:45:54.823 --> 00:45:59.780 I'm looking to AI. AI has been described as a Fourth Industrial Revolution. 817 00:45:59.820 --> 00:46:04.470 I think these sorts of times make all of us in the ecosystem 818 00:46:04.510 --> 00:46:06.320 take stock and think about innovation, 819 00:46:06.360 --> 00:46:09.270 whether that's lending products to different demographics 820 00:46:09.310 --> 00:46:11.648 or whether that's how we do business. 821 00:46:11.688 --> 00:46:14.610 So, AI I'm sure will increase productivity more broadly, 822 00:46:14.650 --> 00:46:16.430 but definitely help our sector. 823 00:46:17.137 --> 00:46:19.980 And I'm still holding on to falling energy prices. 824 00:46:20.020 --> 00:46:24.960 And some of those economists who are predicting a return to 2% this year. 825 00:46:25.000 --> 00:46:29.270 But today is a fantastic illustration of nobody has a crystal ball. 826 00:46:29.310 --> 00:46:30.883 We can look on past events. 827 00:46:30.923 --> 00:46:33.600 We can't predict the shocks that lie ahead. 828 00:46:33.640 --> 00:46:37.240 But with experts like you, we can at least feel better informed. 829 00:46:37.280 --> 00:46:39.650 And we can certainly have more confidence 830 00:46:39.690 --> 00:46:43.320 in making some decisions to take advantage of the opportunities 831 00:46:43.360 --> 00:46:46.277 that remain despite the volatility. 832 00:46:46.317 --> 00:46:48.240 So, I hope you've all enjoyed it today. 833 00:46:48.280 --> 00:46:50.410 Enjoy the rest of your Friday afternoon. 834 00:46:50.450 --> 00:46:52.850 For those of you who drink, I'm looking forward to a gin and tonic 835 00:46:52.890 --> 00:46:54.324 at the end of the day, 836 00:46:54.364 --> 00:46:57.030 this is recorded, so there's a lot of information, 837 00:46:57.070 --> 00:46:58.680 if you would like to listen back, 838 00:46:58.720 --> 00:47:01.700 we will be sharing this over the next week or so. 839 00:47:02.103 --> 00:47:04.970 Thank you very much again for joining us in the webinar. 840 00:47:05.010 --> 00:47:06.473 Thank you, Rob, and thank you, Alex. 841 00:47:06.513 --> 00:47:08.760 Have a great weekend. Bye, bye.