‘I have never seen as much panic, more so than the 2008 crash’

There have been days recently when mortgage broker Aaron McElhinney has had 25-plus voicemails on his mobile – and every time he responded, he received two more.

“I have never seen as much panic, more so than the 2008 crash,” says the finance expert from Derry. “It’s different this time, in that people are getting pulled in both directions with the cost of energy bills and the cost of their mortgages.”

For more than a decade, Northern Ireland’s homeowners have been paying low interest rates that dropped to what one 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 forced mortgage lenders to temporarily pull products, and sparked fears of soaring repayments by next spring. Some economists have predicted the Bank of England will raise its base interest rate from the current 2.25 per cent to 5.8 per cent.

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[ Could interest rate hikes cause a property price crash in Ireland? ]

Boiling the kettle for a coffee break, Derry estate agent Stephen McCarron and his colleagues are debating the fallout.

While “phones are still ringing”, customers have been more “mindful of their purchases”, says McCarron, a director at Donnybrook Estate Agents.

“To look at it in isolation, there is a panic and a fear,” he adds. “We haven’t seen anything like this in quite some time. But I have to remind people, when Covid-19 happened we had nearly the same conversation when the market panicked and people thought it was the end of the world. It wasn’t.

“This time, I do think it is going to affect the market. I don’t see any impact in terms of the value of property.

“There is so much uncertainty – and that uncertainty is fuelled by lenders sitting back looking at the market and waiting to reprice their products. You have people fearing their mortgages will go to 10%. It’s all supposition.

“We’re in a period now where, all things considered, everyone has to take a breath and step back. If, next week, the lenders come back having repriced their products and it isn’t as punitive, things will hopefully settle.”

You have people fearing their mortgages will go to 10%. It’s all supposition

McCarron, who is president of NAEA Propertymark, the representative body for estate agents in the UK, recently held a regional executive board meeting with colleagues representing 17,000 members.

“At that stage, no estate agent had anybody pull out of a sale,” he said. “The only thing was that one member noticed one mortgage offer was withdrawn.”

The UK government last week announced a U-turn on chancellor Kwasi Kwarteng’s plans to scrap the top rate of tax for higher earners. The move led to markets predicting that mortgage rates will peak at 4.96 per cent, rather than 6 per cent.

[ Does the ‘soft landing’ narrative for house prices stand up to scrutiny? ]

One Co Antrim financial adviser said he had been inundated with calls from clients “stressing”.

“In my 34 years working in financial services, I’ve never experienced this,” said the adviser, who did not want to be named.

“I got a text message this morning from someone saying they’re becoming ‘obsessive’ about the predicted hike as their fixed rate mortgage ends next spring.

“People are asking you to take out your crystal ball and advise them on whether they should move their mortgage now and incur a £2,500 early repayment charge.

“But the problem is that if there’s a reversal of fortunes and you find yourself with an offer less than my perceived rate, I’m going to be facing a financial services compensation bill.”

Interest rates were basically a quarter of a per cent above zero. That doesn’t make any sense. No financial institution is going to be surviving on that

Emergency Covid measures introduced two years ago led to interest rates falling to 0.1 per cent – the lowest ever in the Bank of England’s 325-year history. Last December, they were increased to 0.25 per cent in response to calls to tackle surging price rises.

“You were basically a quarter of a per cent above zero. That doesn’t make any sense. No financial institution is going to be surviving on that,” says Samuel Dickey, a director at Simon Brien Residential in Belfast.

Despite the market volatility, Dickey says it has been “business as usual” for his firm.

“On the ground, what I see is that buyers have not pulled out of any sales. They’re proceeding and they’re bidding with intent over the asking price still,” he says.

“Anecdotally, I’m hearing that people are trying to re-agree the terms of their mortgages because they know that when the fixed term comes to an end, they’ll be paying higher interest rates.

“But I think there’s a whole cohort of people who have got very used to the fact we’ve had very low interest rates for the past 14 years, which is an unusually long period of time, and an abnormal interest rate at 0.25 per cent for months.

“If you remember back in the boom time of 2006 and 2007, interest rates were 5 per cent. The market was stratospheric in terms of value. Our average property value in 2007 was £220,000. Today, it’s £169,000. So we’re nowhere near those levels.”

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In the northwest offices of Smart Mortgages, McElhinney is wading through hundreds of emails. Twenty minutes earlier, he has learned that Danske Bank is temporarily withdrawing its mortgage products.

“It’s a very fluid situation. At the moment, it’s a guessing game,” he says.

“I’m seeing rates today as far as 6.15 per cent for existing customers with one bank. It’s very important for them to make sure they get a broker and get the right deal for them.

“There’s a lot of people scared, I’ve got to be honest. I’ve had clients ringing me with mortgages as low as £20,000 to £25,000, wondering what their repayments would be if the rate went to 10 per cent – and would they lose their house.

“There’s so much uncertainty driving the panic. We need to strip all that, wait until announcements are made and have calm heads.”