A famous myth asserts that, in 1899, the US patent office proclaimed that everything that could be invented had already been invented.
While this idea is amusing to look back on more than 100 years later, it shows just how eager people are to accept their own version of normality.
However, normality is very difficult to identify without the benefit of hindsight, especially following a period of dramatic change – an issue that those involved in the mortgage market should be very familiar with by now.
What was considered normal in the mortgage market for years was low rates for an extended period of time, with fixed two-year rates having been below 2 per cent since early 2014, reaching a low of 1.2 per cent in September 2021.
However, since September last year – spurred on by events such as the "mini"-Budget of ex-prime minister Liz Truss – mortgage rates surged upwards, with the average two-year fixed rate peaking at 5.94 per cent in September 2023, significantly altering the mortgage landscape.
Since then we’ve seen lenders slowly bring mortgage rates down. The average rate seems to have stabilised somewhat, floating around 4.73 per cent at the start of the year.
While that is the story of how the mortgage market has ended up where it has, the one question that is pervasive is: is this the new normal?
Obviously only time will tell what will be considered normal for the market and if recent events have taught us anything, anything could happen.
We could see rates rise or fall dramatically in the near future, especially in a general election year, but how can the new normal be acceptable?
Those buyers who enjoyed the era of low rates for many years are unlikely to be keen on the idea that rates remain around the 4 per cent mark, instead clinging on to the hope that rates could one day fall to around 2 per cent.
This 'hope' will lead some people to put off fixing rates as they gamble on rates falling – a risky approach, should some unexpected event cause rates to rocket upwards again.
So how can we help those people accept that where we are could be the new normal?
The truth is the idea of a new normal may become more acceptable as less rate fluctuation occurs.
While we are still in the phase of downwards motions in rates, there are many signs of stabilisation. And as this stabilisation becomes more apparent, buyers may start to accept the climate and begin making their financial decisions based on that.
However, it may take some time for aspiring homeowners or those looking to downsize to get there.
This is why mortgage brokers are valuable.
Making sure that clients are well informed about what is happening in the market, and the reasons behind it, will give them a better understanding about what is normal and what isn't, enabling them to take a wiser course of action.
