I set mortgage rates AMA

[Tempname1234567]

I set the rates on mortgages, it’s kind of interesting and pretty eye opening. Just that with the caveat that anything here isn’t a replacement for real financial advice but feel free to ask me anything :)

If you were making a cheese plate what three would you pick?

What's your third favourite dinosaur?

How much profit do the banks make?

You wouldn’t like me at parties, I don’t really like cheese. I wouldn’t make a cheese plate.

Don’t know about third but I’ll give you my fave.. spinosaurus. We don’t know enough about it, was it aquatic, semi aquatic, we just don’t know.

What matters?
In terms of risk factors.
Obviously income, age - does profession? Length of time in the country?
Does the Experian type credit rating matter at all?
E.g. I've only been in the UK 6 months (almost), planning to apply when I'm off probation in work - will I get offered a much higher rate than otherwise? (If at all)

Annoying response but it depends on the bank. Generally speaking, a lot, except metro bank, they’ve had a rough run at it. Share price is a good indicator of profitability.

on mortgages tho, depends on the bank but generally speaking, if it’s a big bank they don’t make a huge interest margin, as low as 30-40 basis points for the biggies. Specialist banks and lenders will make more because they may need to hold more capital, and they take on more risk.

thanks for a sincere question

How did you get into this? Is this your sole job? Do you think this will get automated? Or is it more of an art than science?

Are rates expected to drop next year and when. Looking to move next year - no rush. Wondered if there's a better month to aim for...

How low can you go? How do we achieve better rates?

Thanks. What does 30-40 basis points mean?

oh so many questions!

Do you think we’re normalising or do you think the volatility of the last few years is likely to continue? (I fully accept that the deathly low rates for years before that wasn’t “normal”)

Without being too outing, what sort of career path gets you to the position where you’resetting mortgage rates?

how much do you look at the competition for setting rates?

When you make the decision to set a rate at x, how many hours/days til that becomes a product on the market?

How many people change between mortgage providers when remortgaging? We are in the position now, changing might save us £20 a month but the (perceived?) faff and upfront costs probably means we won’t.

It’s going to depend on the lender for time in country, different lenders will have different criteria, but in my experience I think you’d be looking at 3 yrs in country for address history. Could be different if you were an expat , likewise with probation but many high street lenders will lend to you if you’re in probation especially if it’s in a similar field to you’re in.

income affects affordability, so yes that matters. Your actual job not so much in my experience. Being self employed can be a bit more tricky but banks don’t say favour accountants over teachers for instance.
score matters, definitely! The biggest one on if they’ll lend to you.

There is more to my job than this but it’s a big part and it gets a lot of focus from the business as I’m sure you can imagine. A lot of money on the line.

i don’t see how you can automate it not entirely, not the maths, the market analysis behind it, especially are you blend a whole range together flexing in certain areas, right sizing returns etc. I’ve done some work to automate the process of getting rates implemented etc but the brains behind it not so much

So we need to break this popular misunderstanding that mortgages rates are based on the Bank of England base rate. Economists predict on more cut in December and then looks like q1 next year for another, maybe one more.

but looking at the curve, rates will come down a smidge more before going back up

How do you set the rates, and how far in advance do you do the calculations for?

Thank you!
What do you mean re the 3 years? Is it that (most) banks won't lend to me at all till I'm in the UK 3 years? (I had thought it was 6 months...)
I've a loooong employment etc history (similar jobs and salary) in ROI previously but I'm led to believe banks don't take that into account at all - is that right?

there’s not as much volatility in swaps as we saw before. As I said about rates are predicted to come down a little bit more before ticking up again. So we’re likely reaching a new equilibrium but we’re not there yet BUT it’s a fools errand to try and predict the market. Look at Covid, no one saw that coming!

I look, or I get my direct reports to look at the competitor marketplace a lot. Almost too much, you can get hung up on it. But ultimately I want their business right?

it depends how long I set it at X before it becomes reality. There is some modelling that needs to be done, snr management to the Exco need to agree etc, plus if the market moves that can scupper things. But if things are drastic I can pull products v quickly, within a day

I’d get a broker and ask them, the building society I worked for was 3 yrs UK address history and now the bank I worked for is the same BUT there may be others that are different.

Are you at a High Street or a specialist lender (if you're comfortable saying)?

Were you having to make decisions really quickly last year during the period where there was sometimes a few hours' notice of product rate changes, and was that stressful from your side? I work with brokers and I know they weren't enjoying it much, haha.

Well it depends on my objectives if I want to make more money or get more business and in what area, but getting that question bottomed out makes sense. Then it’s some maths to work out the returns and some assumptions on how many people I think will buy it, some more maths.

the trouble if you do it too far out for the actual rates itself if if swaps move you have to tweak, but generally when you get an idea you can amend if the swaps go up/ down

I won’t say where I am now but I’ve worked at both.

and tbh there wasn’t too much frantic behaviour last year. Year before though… that mini budget…. Jesus

Oh I've got another question actually - given that you're balancing whether people will take the products depending on rates, are you also the person that gets to decide if products have free legals/cashback etc, or is that someone else's job? Do you have to factor these in?

It means how much profit they’re making 0.30% etc and that’s the difference between the cost of funds and what they lend at

No that’s me too! They’re quite costly lol