The Current Account: The Latest Headlines From Across The Banking Sector - November

2022-11-21 |  Chirag Soree

Headlines from the banking sector this month

In this edition of The Current Account, we focus on the Future of Work and the volatility of the Mortgage market since the announcement of the mini-budget.

The Future of Work is now…

  • The pandemic prompted organisations to re-assess how and where they work. The majority of companies are now well underway enacting changes to their ways of working, their technology and their workplaces
  • On the topic of Ways of Working, we’re seeing organisations adopt a variety of Ways of Working - ranging from enforcing a return to the office 5 days a week to an all-remote model. However, we are seeing 5 clear models emerge:
    1. Remote first: Very few companies have adopted this model, with some large exceptions like Slack. This model says that employees have no requirement to be in the office at any time. Some companies using this model have aggressively reduced their real estate costs, diverting some of that spend into home-working tech for their teams
    2. Work from anywhere (WFA): Twitter (pre-acquisition) was the poster-child for the WFA model. These companies maintain physical workplaces but effectively allow people to choose the working style that works for them. There is no expectation that people are in the office while at the same time workplaces are provided and are set up to support hybrid work
    3. Fluid hybrid: The fluid hybrid model is the most popular model and one the majority of our readers will likely be working within today. This is a mixture of remote and office work, with people choosing the days they go into the office and when they work from home. There is a more structured hybrid model where managers define the days their teams are in the office and when they are at home, but these are increasingly unpopular with knowledge-work teams as often they don’t give people the flexibility to be where they need to be to do their job most effectively. The structured hybrid model can be very effective in the contact centre environment
    4. 4-day week: Championed by Atom Bank in the UK, the 4-day model is being tested by relatively few organisations. Its success is reliant on productivity and employee happiness
    5. Traditional model: The traditional model of being in the office every day is now the exception rather than the norm. Tesla is the most high-profile proponent of office-only working, but there are high-profile names in the investment banking world that are increasingly keen to get their teams back into the office, at least 4 days per week
  • The UK is currently conducting an experiment with 70 companies (covering 3,300 employees) trialling a four-day week, with no reduction in salary. At the halfway point, a survey suggests the trial is going well, with 86% of employers stating they are likely to continue with a four-day week. It will be interesting to see how many of these companies see this through, but it seems to have worked well for Atom bank

PEN Point Of View:

The Future Of Work is now – Organisations that are clear on their offering in terms of ways of working and act decisively are the most likely to attract and retain the right talent for their needs. Our video on this topic launched recently. If you'd like to find out how we can help you create a workplace of the future, do get in touch.

Mortgage market volatility

  • The UK government’s mini-budget announced in September has sparked turbulence for the whole financial system, especially in the mortgage market with lenders scrambling to adjust to reduce their risk exposure. More than 40% of mortgage products were withdrawn from the market pretty much overnight in response to the Government’s announcement. Although most of the measures in the mini-budget have since been overturned, there are still fewer deals available, and interest rates have reached a 14-year high
  • First-time buyers will be struggling even more in this market to get onto the property ladder due to fewer mortgage deals with smaller deposits being on offer, increased monthly payments, and the Help to Buy scheme coming to an end on 31st October. Figures from Moneyfacts show that we’ve already seen a reduction in the number of 95% LTV mortgage offers since the beginning of the year, the most favourable product for first-time buyers due to a lower deposit being required
  • For many years, fixed-rate deals have been the preferred product, with circa 75% of mortgage customers opting to lock in their rates for a fixed term. However, as rates have gone up, the gap between fixed and variable rates have been decreased and, in some cases, reversed. Despite the current cost benefits, the decision to go on to a variable product rate comes with risk given the expectation that the Bank of England will be increasing the base rate to tackle inflation

PEN Point Of View:

We’re likely to see Banks reassess their affordability checks to reduce their risk exposure and to protect their customers. Homebuyers wanting to take out a mortgage will struggle to get the size of loan they need, as banks begin taking into account the cost of living crisis and rising interest rates when calculating how much they can lend. In the short term we expect to see more customers moving on to variable rate products, with first time buyers opting to wait to enter the market to take advantage of lower house prices and more stable interest rates.

And in case you missed it…

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