Adapting to change is essential to support clients and seize opportunities
The following article has been supplied by Caroline Mirakian (pictured), sales & marketing director, United Trust Bank.
Amid evolving economic, regulatory, and political factors, the residential property market appears to have remained resilient with the value of new mortgage lending having increased by 30.8% in the last quarter, according to the FCA. This is certainly an encouraging trend and suggestive of a market recovery.
Expectation is that a further rise in residential activity might be spurred on by a base rate drop with many market commentators expecting at least one this year.
That said, while these are encouraging signs, there are still a number of material factors prohibiting mortgage lending which will not be resolved immediately.
A lack of housing supply combined with increased interest rates and cost-of-living pressures continue to challenge many prospective first-time buyers (FTBs) and those looking to upsize, stifling a full recovery. High house prices compared to average incomes in many areas continue to rule out homeownership due to mortgage affordability and the difficulty of raising a suitable deposit.
Although inflation is back down to 2%, the cost of food, groceries, clothes, mortgages, rents and other regular expenses are still substantially higher than they were two years ago, and this has made putting money aside for a house purchase beyond many pockets.
The new government appears to want to tackle the housing shortage with investment in 300 extra planning officers, reintroducing mandatory new homes targets, a review of so called ‘grey belt’ development, moves against NIMBYism and a focus on getting homes built first and dealing with nutrient and water neutrality later. Housebuilders and developers appear to have reacted positively to Rachel Reeves’ announcements, but any changes will take time to filter through the system. Many new homes released for sale today will have been conceived three years ago, so helping to get more homes built is just one part of the solution. We have to tackle affordability much sooner than that.
First-time buyer activity needs to be supported. According to a recent report from IMLA, this sector sharply declined to 257,000 transactions last year from 405,000 in 2021, and while post-financial crisis regulations such as loan-to-value restrictions have been positive to protect consumers, the limits may need to be looked at more realistically now. Current rules are preventing affordable mortgages from being offered.
Looking at first time buyers, according to a recent study from Legal & General, the Bank of Family continues to play a key role in the housing market, either through gifted deposits or via practical support in helping family members save for their first home. This support reached record levels in 2023, helping 318,400 property purchases with an incredible £8.1 billion worth of lending.
As the new government’s housing initiatives take shape, we should also recognise that consumer profiles have evolved due to various contributory macro-economic influences over the last few years including COVID, high inflation and the fallout of ‘Trussonomics’.
Consumer working patterns have altered with hybrid working now widespread, many have switched to self-employment or contract working and some people are working more than one job. Others are turning to family assistance to make ends meet.
From a lending perspective, we now find ourselves more frequently looking at complex income applications – with many customers falling outside of high street lending criteria as some of the established bank’s legacy systems are unable to handle the nuances of complex income applications.
To successfully navigate the current conditions, we must continue to adapt and remain proactive in our approach to change. Getting good advice from well informed intermediaries is now paramount, especially if customers’ circumstances are likely to rule out the use of mainstream lenders.
By leveraging a comprehensive understanding of market conditions, potential regulatory changes, and innovative lending products, brokers can better support their clients and navigate the challenges of the residential mortgage market.
The focus should remain on providing tailored, holistic advice that that takes a long-term view and, as always, maintaining strong lender and client relationships is key to thriving in the changing landscape.
The most successful brokers tend to be those who are proactive, even with small things such as maintaining their websites and staying on top of their CPD and market intelligence. They also constantly look for new business and often start with the low hanging fruit – their existing customers. There are always people who need help, and we know from research we’ve just carried out that brokers who deal with specialist mortgages are very likely to retain that customer when they next need advice. Many borrowers are yet to face their ‘rate shock’ and will need some assistance with that. Others might benefit from a second charge loan to release cash or consolidate debts whilst retaining a low rate on their main mortgage for as long as they can but have no idea what a second charge loan even is. Being proactive is so important in this environment.
Finally, knowledge of lenders who are ready, willing, and able to meet evolving demands is crucial. In the face of a recovering, but still slightly unsettled economy, we must adjust accordingly. From supporting first-time homebuyers, lending to people outside of the usual 9-5 career, giving the benefit of the doubt to applicants with credit blips and lending into retirement in response to people working for longer, either by choice or by necessity, specialist lenders must flex and review to ensure we are still serving the underserved.
That remains our focus at UTB. Put the customer first and everything else should fall into place. We have the right people with the right skills in the right roles providing brokers with the support they need throughout the process. We encourage brokers to reach out. Ask us questions. Test what we do. Send us deals on unusual properties with multi-income borrowers with a bit of adverse thrown in. Let us show you what we are capable of.
The market is challenging, and the outlook is still a little unsettled, but brightening I would say. However, one thing will never change; people need homes. Homeownership provides families with stability and an opportunity for wealth creation and we want to help as many people as possible access those opportunities.
