The mortgage market has remained resilient during yet another year of uncertainty. Not only have we seen rising living costs, further house price growth, but also looming interest rate rises, all of which have had huge ramifications for borrowers, but for lenders too.
Steve Seal is chief executive of Bluestone Mortgages
The mortgage market has remained resilient during yet another year of uncertainty. Not only have we seen rising living costs, further house price growth, but also looming interest rate rises, all of which have had huge ramifications for borrowers, but for lenders too.
The ongoing implications of COVID-19, such as furlough and redundancy have meant that thousands, if not millions of customers, are now in a more difficult financial situation than they were before the pandemic.
At the same time, the crisis forced a number of lenders to withdraw products from the market due to the impact the enforced lockdown had on servicing levels.
However, I, personally, have been extremely impressed with how the industry has reacted to help a growing cohort of customers, with evolving borrowing needs, step onto or up the property ladder.
And, as we look ahead to 2022, which will undoubtedly present its own challenges, it is clear that there will be opportunities for lenders and brokers alike, to support people’s homeownership dreams.
Impact of inflation
In recent times, inflation has become the buzzword, and perhaps one of the biggest concerns affecting borrowers. And, with inflation predicted to surpass 5% as soon as early next year, it is likely the Bank of England will act to increase interest rates to curb this.
But after a year of the base rate being held at a record low of 0.1%, any future rises will undoubtedly cause concern among households, many of whom won’t have seen interest rates above 1% for more than 10 years.
Not only will consumers have to deal with the rising cost of living, with family spending expected to increase by £1,700 a year, but also rising borrowing costs for mortgages, credit cards and loans.
As these pressures continue, we’re likely to see more customers locked out of the mainstream mortgage market, and the challenge will be how we, as an industry, can best support them.
This is where brokers have a crucial role to play, in hand-holding their customers and pointing them towards the best options available for their circumstances, such as a fixed-rate product.
Complex credit customers on the rise
The pandemic has undoubtedly put a financial strain on many, if not all individuals at some point over the last 18 months. While for some, keeping up with regular payments has been a struggle, with Citizens Advice reporting that this has been the case for about six million people during the pandemic, for others, the pressure has been even greater.
Between October and December last year, 194,203 new County Court Judgements (CCJs) were issued in England and Wales, compared with 112,261 the previous quarter. Self-employment has also been on the rise, with the number of self-employed now standing just shy of 4.3 million.
Add to this, the fact that several government support measures have come to an end, we’re likely to see a larger cohort of consumers with more complex borrowing needs.
Many of whom will be unable to achieve their homeownership dreams because they have been turned away from high-street banks and may think they have nowhere else to turn to.
As a result, the demand for specialist lending is only set to grow. Over the coming year, lenders will need to innovate to provide a range of solutions for customers with a range of complex financial profiles.
This is where the specialist lending market is leading the charge, with a growing number of lenders tailoring their credit policies to support this disenfranchised group.
Future support for first-time buyers
Getting onto the property ladder is becoming increasingly out of reach for many would-be first-time buyers. While the Help to Buy scheme has undoubtedly supported many looking to take their first steps over the years, with just 15 months left until the end of the Help-to-Buy scheme, the clock is ticking for the industry to come up with alternatives.
Not only will the scheme’s cliff-edge have a significant impact on first-time buyers, but will also have wider ramifications for the market, such as builders’ ability to sell homes, housing stock growth rate, but also the government’s house building agenda.
As such, we, as an industry, should be asking ourselves how we can best support these customers moving forward and offer them greater choice, whether that be through schemes such as shared ownership or Deposit Unlock.
Creating opportunities
Looking ahead, the specialist lending market will continue to have an important role to play in facilitating a step-change in people’s financial positions.
No matter whether someone has a blip in their credit history, no credit history or is a contractor or self-employed, we, as an industry, have a duty of care to support these customers, as these cohorts are only likely to grow.
My message to brokers is to fully embrace the opportunities that the new year will bring. While it may seem like market challenges continue to evolve, the specialist market is only set to grow given the ongoing economic uncertainty.
There is a clear opportunity for brokers to retain existing clients as well as supporting new ones in making their homeownership dreams a reality.
