'The glass firmly half full' says one market expert
Lenders say they are feeling optimistic about the mortgage market over the year ahead. Rather than retrenching, they are looking to expand their offerings, while expecting increased remortgage and product-transfer business.
As customers shift their attention toward variable rates and shorter-term fixed rates, lenders said they plan to develop innovative products that address special circumstances and the current economic climate.
Positivity returning to the mortgage market
Charles Morley (pictured), director of mortgage distribution at Metro Bank, believes customers are in for a bumpy ride over the next few months. He pointed to the cost-of-living crisis, rising energy costs and interest rates, as well as recent reports that the rate of mortgage-lending growth in the UK is expected to slow this year.
“However, an air of positivity has returned to the market,” he said, “and I firmly believe our industry is well equipped to cope with the current environment.”
Morley added that, although the housing market undoubtedly will experience a short-term blip, he is confident it will demonstrate medium-term resilience.
Whilst there is uncertainty over how the coming months may impact customers and lenders, Morley believes 2023 should be seen as a year where the ‘glass is firmly half full and not half empty’.
Shift toward variable rates
Jeremy Duncombe, managing director for Accord Mortgages, said that, due to market and interest rate uncertainty that followed the mini-Budget, he has seen many borrowers now opting for the flexibility of tracker mortgages.
“Tracker mortgages have recently become much cheaper than fixed rates, and they allow people to benefit from any ongoing downward trend in mortgage rates,” he said.
Historically, Duncombe said, fixed-rate mortgages have always been most popular, however he expects tracker rates to lead the way for as long as uncertainty remains within the market.
Read more: What will dominate intermediary business in 2023?
Changes in buy-to-let market
Duncombe added another important area is buy-to-let, which is facing a combination of challenges, such as complying with strict new energy performance certificate requirements, maintaining income levels and meeting affordability thresholds for property purchases in a higher-rate environment.
“Helping landlords to withstand such pressures will require further innovation this year from lenders, such as the introduction of top slicing, simplifying Interest Coverage Ratio, and reducing Interest Coverage Ratio Rate to make products accessible to more landlords,” Duncombe added.
Lenders’ plans for 2023
Morley said Metro Bank, like many lenders, will be prioritising further development of its systems and product range in 2023, aiming for improved efficiency, agility and the ability to deliver a wider product breadth to customers and intermediary partners.
With the current environment providing stumbling blocks for some consumers, it is clear lenders are shifting their focus to innovation this year.
While Duncombe believes affordability will still be a key focus for brokers and their clients, he has seen signs of mortgage rates stabilising and dropping.
Duncombe said Accord’s priority in 2023 is to continue developing its range and innovating with purposeful propositions to help brokers and their clients.
“This includes supporting underserved borrower segments who really need our help, like the self-employed, contractors and first-time buyers, and we are committed to the high loan-to-value market too,” he added.
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