Expert discusses market conditions and available support for borrowers
In the current economic landscape, where interest rates remain high and household finances are feeling the squeeze, affordability has become a key concern for many.
An estimated two fifths of UK adults, around 21.9 million, are on average £215 worse off per month compared to a year ago, according to research from Bluestone Mortgages.
However, while challenges persist, brokers and lenders alike have a valuable role to play in helping would-be and existing borrowers weather the storm and achieve their homeownership ambitions.
How are people coping with their mortgage payments?
The squeeze on affordability, Reece Beddall (pictured), sales and marketing director at Bluestone Mortgages, said, is taking its toll.
An estimated one in five, 18%, of UK adults, the equivalent to 9.7 million people, have missed a payment in the last 12 months, according to The Guardian.
“This is being felt by homeowners in particular, with 700,000 people falling behind on mortgage payments, a figure expected to rise as millions of customers reach the end of their fixed rate mortgages,” said Beddall.
These missed payments, he added, have a knock-on effect on someone’s credit score, and can impact their ability to borrow, often resulting in them being turned away from mainstream lenders and feeling as if they have nowhere to go.
In times like these, Beddall said, it is important for brokers to think outside the box and pair their clients with suitable specialist lenders, in order to support disenfranchised customers who are struggling to make their homeownership dream a reality.
“With our own research showing that one in seven UK adults are too embarrassed to seek financial support should they need it, the mortgage industry must look to raise greater awareness and understanding of the support on offer,” he said.
For brokers, Beddall said this means creating a safe space for customers to discuss their unique circumstances and any credit issues they are facing, in a judgement-free environment.
Lenders, too, he added, can contribute by placing greater emphasis on education to enhance financial awareness. Moreover, Beddall called on lenders to provide further educational materials to both brokers and borrowers in this challenging environment.
“As an industry, it is our duty to guide customers to the available support options that suit their unique circumstances,” Beddall said.
What support is available for struggling borrowers?
The Financial Conduct Authority (FCA) has issued comprehensive guidance to mortgage lenders, urging them to support customers navigating financial challenges amid the escalating cost-of-living.
This guidance emphasises the importance of tailored forbearance measures that align with individual circumstances.
The FCA’s latest data and analysis of the mortgage market revealed an estimated 356,000 mortgage borrowers could encounter payment difficulties by the close of June 2024.
If the weight of mortgage payments becomes overwhelming, the authority has said borrowers must initiate contact with their lender at the earliest opportunity. Lenders offer a spectrum of tools to aid borrowers, including budgeting assistance, access to debt advice, and the provision of customised mortgage forbearance plans.
As we approach the new year, Beddall said both brokers and lenders will play a crucial role in supporting customers through these challenges.
With interest rates expected to remain high into 2024, he said, affordability is likely to remain an ongoing concern for consumers.
Beddall added that effective communication with clients, fostering an open and honest environment for them to share their situations is essential in building and retaining trust.
“Whether a customer has complex or adverse credit needs, solutions are available, and it is the collective responsibility of the industry to make customers aware of the options and support available to them,” he said.
How are you navigating affordability challenges for your clients? Let us know in the comment section below.
