Search Coreco


Bull In A China Shop


There has been a wave of euphoric headlines over the last few days including “Investors bet that worst of recession is over and predict new bull market” in The Times and other commentators suggesting house prices will now stabilise and even rise by the end of the year.

Whilst on the other side of these headlines we also get The Guardian suggesting that “Bank of England braced for third wave of financial crises”, with the new £50b cash injection being used to avert further disaster as banks struggle to increase lending and keep a lid on bad debts.

It is easy to get carried away, as goodness knows, we all need some good cheer after 18 months of turmoil, and there are definite signs of the now infamous “green shoots”, but the question is do they actually have strong roots ?

Well, the phrase “bull in a china shop” has perhaps never been so apt. For whilst those aggressively piling back into the stockmarket and calling the end of the bear is great, and confidence from the City is essential for us to pull clear of this recession, one false move could well send things crashing down again. The best quote definitely came from David Schwartz, a prominent stock market historian, “History says fill your boots, sell your wife, dive in”.

Nowadays, I try not to get too swayed by headlines one way or the other and can only call it how I have thought things will be for a while now.

I still believe we are indeed on our way out of the gloom, but ever so gradually. Quite frankly, that is a good thing. The last thing we all need is a mini “boom bubble”, that lasts a few weeks and then we enter the second trough of a “W-shaped” recession.

This time we need to slowly build our way out on more solid foundations. I believe many people now generally accept that the next 12 months represent the best opportunity to buy for many a year, perhaps even a generation. Enquiry levels and growing estate agency footfall is not a fabrication.

I do believe that prices will level off by the end of this year, and we will have a less than 10% drop overall this year. In some areas, I believe we are already at the bottom. Location is still everything and you cannot blindly apply a blanket drop evenly across the country, (Halifax Price Index anyone ?).

The number of mortgage products is increasing, the battleground has already moved on between lenders from 60% LTV to 75% LTV, much quicker than was expected. Some lenders such as Woolwich and The Mortgage Works are stepping up, albeit tentatively, their Buy-To-Let propositions. It is only a matter of time before more products are available at 80% – 90% LTV.

I also do believe that too many people wait to actually see things getting better before acting as if they are. If you do that, you have missed the boat, so I try to look ahead further.

The Bank of England were painfully slow to see that inflation was not the main issue when it should have been cutting rates at the beginning of this crises. They did not look ahead and ignored people like David Blanchflower, one of its’ own members. Likewise, there could be inflationary pressures lurking on the horizon as a by product of things like Quantative Easing and how consumers react when the light at the end of the tunnel is shining brightly.

Yes there are further redundancies to come and rises in unemployment, but 3.5m is not as much in percentage terms as it once was, with many thinking that if they are still in a job in the next few months then they should be safe.

However, the issue is still that house prices will continue to stay relatively low in the short-term, and with some inflationary pressures as we begin to regain confidence further, interest rates will rise. This means that those with high LTV mortgages will be unable to remortgage and may then pay the price for not fixing in at an affordable rate early.

Whilst some may accuse me of scaremongering, and have, I disagree – it just seems like common-sense for those on the cusp to seek advice now, and at least reserve a fixed rate.

For those who ask me what I would do if I had money now, rather than helping to start a new business, yes, I would look to buy. I would also look to invest. Prices are low, and even if everything does fall another 10% they will rise further, and by more in the long-term. It is the long-term we should all be interested in.

I am not saying I am right, or that I am a notable economist who should be listened to, (what does anyone know at the moment anyway!), but if I promote some healthy, thoughtful debate then I have done my job.

Either way, the bull is just getting off the bus outside the china shop – will he charge through safely, knock over the very first piece, or amble passed for a quick pint in the local first? The next few months should be very interesting.

Comments are closed.

Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

Read more posts by Andrew