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Industry reacts to ‘disappointing’ yet ‘inevitable’ base rate rise

Marketing March 23, 2023 No Comments

While coming as little surprise to most, today’s base rate rise to 4.25% has still been met with disappointment, along with some resignation as to the predicted direction of travel. […]

While coming as little surprise to most, today’s base rate rise to 4.25% has still been met with disappointment, along with some resignation as to the predicted direction of travel.

The general feeling is that, although less than the 50 basis points rise seen in February, a rise was inevitable given the inflationary uptick in February and the US central bank rise yesterday.

There’s concern for those on variable rates, but with a flurry of lenders having reduced fixed rates this week, it’s felt the predicted base rate rise has been factored in and little impact will result in that area.

Bluestone Mortgages sales and marketing director Reece Beddall says: “While today’s decision is clearly in response to inflation’s surprise jump to 10.4%, it will be a tough pill for consumers to swallow, nonetheless. Interest rates have risen consecutively for almost a year, pushing mortgage repayments higher still and putting a chokehold on people’s personal finances. Affordability challenges will no doubt remain for the foreseeable future.”

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Moneyfacts finance expert Rachel Springall comments: “A rise to base rate will come as disappointing news to borrowers who are not locked into a fixed rate mortgage. The incentive to fix is clear from the continued rise to the average standard variable rate, which is now above 7%, a level not breached since 2008.”

Also expressing disappointment, London estate agent and former RICS chairman Jeremy Leaf adds: “There is a close call between change and no change – this latest rise in rates is a huge disappointment for the housing market as we were hoping the bank would trust in its own data and leave well alone.”

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Stonebridge chief executive Rob Clifford described the rise as a ‘racing certainty’ but doesn’t expect big changes to follow.

“Once it was revealed that inflation had risen to 10.4% in February, followed by the Fed’s decision to raise rates yesterday in the US, it seemed like a racing certainty the MPC would have to act today with a further bank base rate rise.

“The markets have already been reacting to that news with swap rates increasing, and by this morning that rate rise already seemed priced in. My feeling is that the search for business – particularly from the mainstream, high-street lenders – will continue to keep mortgage rates round about where they are,” he says.

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Just Mortgages operations director John Philips adds: “Although the base rate has gone up, we have seen mortgage prices falling in recent months and customer enquiries to our brokers across the country have been remarkably robust since the start of the year.”

A possible outcome could be more demand for rental housing, says IMMO real-estate platform co-founder Avinav Nigam.

“The result of this is more demand for rental housing, and therefore a greater need to put time, money and effort into improving our private rental sector housing stock,” he comments.

By Linda Ram

Source: Mortgage Strategy

Mortgage searches dip 4% in February

Marketing March 6, 2023 No Comments

Mortgage searches in February posted a “strong performance”, but fell short of January’s record highs “due to being a shorter month”, says Twenty7tec. The property platform says it handled 1,537,024, […]

Mortgage searches in February posted a “strong performance”, but fell short of January’s record highs “due to being a shorter month”, says Twenty7tec.

The property platform says it handled 1,537,024, down 3.9%, across all searches from a month ago, with purchase enquiries dipping by 3.2% and remortgage enquiries falling by 4.7%.

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It adds that February saw 10 of the 30 busiest ever days for mortgage searches, with remortgages posting their fourth busiest ever month, but only the 14th busiest month for purchase searches.

First-time buyer searches in London staged “a resurgence”, rising by 25.6% to 9,774 searches “on January’s poor performance”.

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Overall, FTBs accounted for 17.5% of the February market, which the firm says, “continued to represent a lower proportion of the market compared to the long-term average despite volumes rising”.

February ended with over 16,355 products and variants available, up 9.1% compared to the end of the prior month.

The platform says there are now more products in the market than at any time since June, adding that there had been a rise in product availability across all maximum loan-to-value ranges from 60% to 100%.

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Twenty7tec director Nathan Reilly says: “February saw a mid-month slump and a month-end resurgence that matched activity levels in January.

“Hopefully, advisers and lenders will be able to build on that in March, with the usual springtime boom often mounting as we head towards Easter.

“The macroeconomic picture remains fluid and the market will be preparing for 23 March when the Bank of England makes its next rate decision.”

By Roger Baird

Source: Mortgage Strategy

Four-day week ‘would not work for mortgage market’ ‒ analysis

Marketing March 2, 2023 No Comments

A four-day working week is a good idea in theory, but not really compatible with the workload of a typical mortgage broker, according to intermediaries. Last week saw the publication […]

A four-day working week is a good idea in theory, but not really compatible with the workload of a typical mortgage broker, according to intermediaries.

Last week saw the publication of the results of a trial into a four-day week, with the majority of firms stating that not only had it improved performance but that they were continuing with the structure.

However, when quizzed by Mortgage Solutions, mortgage brokers were split on the idea of a four-day working week. Advocates argued it had helped them to be more productive, working smarter during the week, though there was scepticism about the impact it could have on delivering adequate service to clients.

Boosting productivity

One mortgage broker who is already working a four-day week is Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management.

She said that since going self-employed, she has worked on the basis of usually having Frdays off, arguing that it leads to a healthier work/life balance.

“This encourages me to be more productive, work harder and smarter during the week, knowing I am taking a day or even an afternoon or few hours for myself at the end of the week. Especially with those dedicating their weekends to their children and family time, this means you have a day for yourself and your own mental health,” she explained.

Gary Boakes, director of Verve Financial, said that he too had been working a four-day week until recently, noting that he “felt I needed the extra time during the day to work on the business rather than in the evening”.

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Maintaining service levels

Stuart Powell, managing director of Ocean Equity Release, said that while he was all for a four-day working week in theory, it presented a challenge for smaller firms in ensuring such a structure did not impact their customer service levels.

“Many firms give people different days off, however for firms with less than five staff, this may reduce coverage for clients and be an issue in holiday times,” he added.

Bickford agreed that fitting in with client expectations and lender service challenges can make picking working hours more challenging.

She said: “If the working week dictates I need to work on a Friday ‒ for example, if this is most convenient for the client or if the week is so busy it is not possible to take the Friday off ‒ I will of course, but in general I believe a four-day week encourages productivity. I have no qualms about working slightly longer days during the week to have this balance.”

Are we working at capacity?

However, not all brokers believe it is a workable option.

There is “no way” a business that interacts directly with the public could succeed with a four-day week, according to Craig Fish, director of Lodestone Mortgages & Protection, who noted that there are times when even not working on a weekend will have an impact on a broker’s business.

He added: “Lenders could make things easier by improving their systems, but the costs involved to do this are likely prohibitive, so I fear that brokers will find themselves working ever longer hours to ensure that the client is getting a first-class service.”

If advisers are able to do the same amount of work in four days that they were doing in five, then they are not working close to their capacity, suggested Andy Wilson, director of Andy Wilson Financial Services.

He added: “I believe most brokers will work quite long and unsociable hours if they want to meet their own and the business’s targets. I also feel most would exceed the four days just to get jobs done and get cases through more quickly.”

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It might work for other industries, but not mortgages

Dominik Lipnicki, director of Your Mortgage Decisions, said that he was sceptical of how practical a four-day week would be for most businesses, noting that while he was a fan of flexible hours, “our clients would rightly expect to be able to be assisted at the very least five days per week”.

He continued: “I am not sure that many mortgage businesses would be able to afford to hire more staff to cover the extra day and if they did, surely, it is the clients who ultimately pay? I think that for some businesses, a four day week might work but that would very much be driven by the type of business that it is.”

This was echoed by Benjamin Blyth, director of Houz Mortgages, who suggested a four-day week does not really suit the mortgage industry as a whole. “We need the engine running seven days a week, but if a four-day week can be scheduled into rotas, it’s great for staff. I can never tie myself to four days because client demand will always vary across the seven days in a week.”

Working smarter, not harder

While many brokers were unconvinced about the merits of a four-day week, there was near consensus that technological developments had given them more control over the actual hours worked.

Chris Barker, managing director of Manchester Money, said that technology today means brokers can “pretty much work what hours they want, and from wherever they want to be, as long as it fits with their clients’ needs”.

Paul Seed, mortgage and insurance adviser at Mortgages 4 U, noted that meeting client expectations was now more about the response times rather than the hours or days worked.

He continued: “Speed of response, especially with live applications, is increasingly critical to maintain a client’s trust. People want to know that they are in safe and responsive hands.”

Embracing the benefits of flexible working can also deliver a better standard of service, too, some suggested. For example, Kylie-Ann Gatecliffe, director at KAG Financial, said that her firm is smarter now in working around clients, removing the need to pull 70-hour weeks.

She continued: “We actually produce higher results, coming in feeling fresh and motivated. Whilst clients can still have appointments on an evening and on a weekend when required, we plan our diaries so the whole team have a balanced week, rather than everyone being stressed and under pressure trying to juggle life/work balance.”

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By John Fitzsimons

Source: Mortgage Solutions

Bank of England boss signals interest rates may have peaked

Marketing March 1, 2023 No Comments

The Bank of England governor, Andrew Bailey, has signalled interest rates may have peaked after 10 successive increases in the official cost of borrowing since December 2021. Speaking in London, […]

The Bank of England governor, Andrew Bailey, has signalled interest rates may have peaked after 10 successive increases in the official cost of borrowing since December 2021.

Speaking in London, Bailey said Threadneedle Street would assess the impact of tighter policy on the economy before sanctioning any fresh moves.

However, the governor also warned that the Bank was alert to the risk of repeating the mistakes of the 1970s and would not hesitate to raise rates further from their current 4% should inflationary pressures become embedded.

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Bailey voted for a quarter-point increase in interest rates at the last meeting of the Bank’s nine-strong monetary policy committee in February but made clear on Wednesday that he was now adopting a wait-and-see approach.

“At this stage, I would caution against suggesting either that we are done with increasing Bank rate, or that we will inevitably need to do more,” he said. “Some further increase in Bank rate may turn out to be appropriate but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.”

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Financial markets have been pencilling in further increases in interest rates later this year, but analysts said Bailey’s speech pushed back against this idea.

Samuel Tombs from Pantheon Macro said: “It is clear from Mr Bailey’s speech that committee is placing more emphasis on the substantial tightening already delivered and would like to call time on its hiking cycle as soon as it feasibly can. It makes little sense at present, therefore, to price-in a terminal rate at 4.5% or higher.”

Krishna Guha from Evercore said Bailey had “become the first central bank chief to push back against the hawkish global repricing of rates in recent weeks that pushed the market discounted peak UK bank rate close to 5%”.

Bailey said the Bank’s outreach programmes with the public had brought home to him the impact high inflation was having on people’s lives. Although it has fallen back slightly from its peak of 11.1% late last year, the government’s preferred measure of the cost of living still shows inflation running at 10.1%.

“People should not have to worry about inflation in this way,” the governor said.

Bailey added that the UK had been hit by a series of “significant economic shocks” – including Brexit, Covid and the rise in global energy prices linked to Russia’s invasion of Ukraine – and there was “no easy way out”.

People on lower incomes were struggling to make ends meet and the Bank needed to ensure that the situation did not get worse through allowing “homemade inflation” to take hold.

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“I am afraid monetary policy cannot make the shock to our national real income go away. But what monetary policy can – and must – do is to make sure that the inflation that has come to us from abroad does not become lasting inflation generated at home. Homemade inflation will not make us any better off as a country. Those with weak bargaining power will fall further behind.”

Bailey said failing to raise interest rates now may necessitate tougher action later. “The experience of the 1970s taught us that important lesson. But equally … we have to monitor carefully how the tightening we have already done is working its way through the economy to the prices faced by consumers.

“Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably.”

Bailey said the shortage of available workers across much of the UK economy would be a key factor in future decisions by its ratesetters.

“The UK labour market remains very tight. Since the start of the Covid pandemic, we have seen a large increase in the number of people who do not take part in the labour market in this country. The UK labour force has shrunk.”

By Larry Elliott

Source: The Guardian

Shared ownership should be rebranded to attract the borrowers: Just Mortgages

Marketing February 23, 2023 No Comments

The term ‘shared ownership’ is acting as a barrier to the borrowers it is designed to help, according to Just Mortgages. The mortgage advice company says that feedback from across […]

The term ‘shared ownership’ is acting as a barrier to the borrowers it is designed to help, according to Just Mortgages.

The mortgage advice company says that feedback from across its broker network suggets clients regularly misunderstand who the scheme is targeted at and what the term really means.

Other misconceptions around shared ownership include what properties would be acceptable, what rates are available and how long the process may take.

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Just Mortgages says shared ownership is often positioned as a vehicle for those first-time buyers without a deposit but it highlights that the scheme can be appropriate in those situations where relationships break down.

It suggests that this is an emerging group of borrowers that shared ownership could help but is often left off the agenda as the name suggests it might not be suitable for that borrower.

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Just Mortgages national operations director John Philips says “there is clearly an issue to be addressed with shared ownership”.

“Recent anecdotal feedback from some younger borrowers revealed that they actually thought shared ownership meant sharing the property and not living on their own.”

“Those who are slightly longer in the tooth may be tempted to scoff at this but our market is full of jargon and terminology that is completely unfamiliar with a new generation of borrowers and people with new borrowing requirements.”

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“I’m worried that the terrific opportunity shared ownership provides to help people get on the property ladder is being diminished through clumsy terminology so maybe a rebrand is in order. Shared deposit scheme, low deposit scheme and deposit deferral scheme are just some examples of terms that would position the product in a more appropriate light.”

“I think any re-branding or re-positioning would benefit the whole industry and we would welcome the involvement of lender and broker trade bodies to support this.”

By Becky Bellamy

Source: Mortgage Strategy

2023 could be the year of recovery for the UK

Marketing February 15, 2023 No Comments

It might be a little too early to talk of spring buds but the green shoots of recovery may not be too far away. When winter began, talk in the […]

It might be a little too early to talk of spring buds but the green shoots of recovery may not be too far away.

When winter began, talk in the mortgage market was concentrated on the impact Kwasi’s Kwarteng’s disastrous “mini”-Budget was having on the UK’s financial stability.

Fast forward two months and the outlook has improved significantly. Five-year swap rates may have risen slightly over the last day or so, but at the end of January they dropped below 3.5 per cent for the first time since September 2022 – falling as low as 3.285 per cent.

Meanwhile, two-year swaps have fallen to 3.944 per cent, down from 4.357 per cent in December 2022.

These figures are evidence of increasing market stability and offer hope that rates will not reach the highs predicted last autumn.

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So what has changed in recent weeks? Firstly, inflationary pressures are beginning to ease slightly.

Wholesale gas prices have fallen to below levels seen before Russian’s invasion of Ukraine.

And this should eventually feed through to lower bills for households. Petrol and diesel prices have also dropped sharply from their summer high.

Meanwhile, the latest figures from British manufacturers, show that factory output prices unexpectedly fell 0.8 per cent in December, the biggest decrease since April 2020.

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Although inflation remains more than five times above the Bank of England’s 2 per cent target, it has fallen for two consecutive months and there are signs that it is heading towards single digits.

As well as an improved inflationary outlook, the pound’s recovery and the performance of the London Stock Exchange are also signs that investors have more faith in the UK economy and its recovery than some sections of the mainstream media.

Lenders will be keeping a close eye on all these key indicators to get a sense of what is to come.

Clearly we are not out of the woods yet; household finances are still under significant strain with real wages falling and the prospect of higher interest rates.

But the good news is that the expected peak in interest rates may not be as far away as was predicted in the autumn.

Forecasts now put the ceiling for base rate at 4 per cent to 4.5 per cent. This means we may only be one, or possibly two, rate rises away from a levelling off.

My sense is that the outcome is already baked into swap rates, meaning mortgage rates may also have reached their peak in the current cycle.

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We are already seeing lenders start to reduce rates, with the best five-year deals for landlords back under 5 per cent, albeit with higher fees.

Renewed competition among lenders combined with improved swap rates and a less gloomy economic outlook should help to stabilise the market and could even push rates down further.

In turn this will help to improve affordability issues for landlords. Stress tests were tightened significantly as rates began to rise, which restricted buy-to-let borrowing, but they are now beginning to ease.

No one knows exactly what’s around the corner, but there is a sense that with spring on the horizon the most turbulent days are behind us.

Events of the past six months mean conditions are not going to return to ‘normal’, but the market and the UK economy is showing signs of resilience.

Let’s hope 2023 is a year of recovery.

By Phil Riches

Source: FT Adviser

Mortgage Approvals Down but Sunnier Days Ahead for The Property Market in 2023

Marketing February 14, 2023 No Comments

Recent uncertainty in the property market during the closing stages of 2022 has led to the number of mortgage approvals declining by -20% in the past year, while the number […]

Recent uncertainty in the property market during the closing stages of 2022 has led to the number of mortgage approvals declining by -20% in the past year, while the number of remortgaging approvals has soared as existing homeowners stay put and look to stabilise their financial foundations by borrowing more.

The cost of living crisis and increasing price of borrowing has had a significant effect on the mortgage sector.

In 2021, there were a total of 944,704 house purchase mortgage approvals in the UK. In 2022, this dropped to 753,946 approvals, marking an annual decline of -20.2%.

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Financial concerns induced by the cost of living crisis clearly caused many potential buyers to postpone their plans in 2022, not least due to the fact that mortgage prices shot up seemingly overnight following the shambolic mini budget unveiled by the government in September of last year.

At the same time, the number of remortgaging approvals increased from 460,462 to 539,528 between 2021 and 2022, an annual rise of 17.2%.

This serves as further evidence of public concern brought on by recent economic uncertainties, with more homeowners trying to reduce their mortgage rates or release some equity to fund soaring costs elsewhere in their lives.

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These market trends are further supported when analysing the overall monetary value of mortgage approvals.

In 2021, the total value of property purchase approvals was £208bn. In 2022, this dropped to £176bn, a decline of -15.3%.

At the same time, the overall value of remortgaging approvals increased from £92bn to £113bn, marking a 22.6% rise.

However, while the total value of homebuyer mortgages has fallen, the average value of each individual approval has actually increased by 6.2%, from £219,899 in 2021, to £233,510 in 2022.

This shows that while the number of buyers entering the market has fallen, the amount each is borrowing has grown, as they tried to contend with house price highs that were driven by the pandemic market boom and, as of yet, have shown little signs of reducing.

The average value of a remortgaging approval has also increased, rising by 4.6% between 2021 and 2022.

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“Despite house prices continuing to climb in 2022, the immediate economic uncertainty that rattled the mortgage sector following September’s mini budget has had a notable impact when it comes to the number of mortgage approvals attributed to new house purchases in 2022.

At the same time, there has been a notable uplift in homeowners deciding to play it safe and stick with their current home, opting to remortgage in order to improve both their home and their financial stability.

However, mortgage rates are already on the decline so far this year, dropping by -14% in January alone.

On top of that, the wider economic outlook for 2023 is looking far brighter than many people feared towards the end of last year.

All in all, we expect spring and summer to bring sunnier days to the property market and a rejuvenated level of buyer activity to sweep the market.”

Source: Property Notify

Green shoots of recovery appear in the mortgage market

Marketing February 10, 2023 No Comments

Confidence in the mortgage market is showing healthy signs of recovery following the disruption of the mini-budget in September 2022, judging by the latest mortgage market tracker report from the […]

The average number of Decisions in Principle (DIPs) that intermediaries processed in Q4 fell slightly by two when compared to Q3 2022, reaching the level seen two years ago in the final quarter of 2020. Despite a drop in November (to 23 per intermediary), December saw a rebound, rising back up to 26 and matching the levels seen in July and August of 2022.

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In Q4, the conversions of DIPs to completions also fell very slightly by 1% from Q3 2022, down to 37%. The business area and region seeing the biggest drop in conversions were in directly authorised DIPs and brokers operating out of the South of England, seeing falls of 11% and 6% respectively during Q4. Conversions for first-time buyers and buy-to-lets also remained steady with slight falls of 3% and 2%, reflecting a strong mortgage pipeline in the face of the macro-economic challenges now facing FTBs and some BTL landlords.

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The dent in confidence caused by the mini-budget and resultant market volatility was evident in the data, with 29% of intermediaries reporting in Q4 2022 that they were ‘not very confident’ about the outlook for the mortgage industry, rising from just 4% during the same time period in the previous year. However, the most prominent dip in confidence for Q4 was during October, with November and December showing signs of stabilisation – returning to a 70% proportion of intermediaries who felt either ‘fairly confident’ (56%) or ‘very confident’ (14%) in December.

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Comparatively, intermediary confidence in their own business declined only slightly. In Q4, 11% of intermediaries reported being ‘not very confident’ in the outlook for their business, rising from the 5% reporting the same in the previous quarter. However, overall, 87% of intermediaries still reported that they were either ‘very confident’ or ‘fairly confident’ in their own business outlook during the final quarter of 2022 – a dip of only 7% from Q3 despite the October disruption and rising interest rates.

Kate Davies, executive director of the IMLA, commented: “There are green shoots here, with December marking a noticeable increase in confidence compared to October. The Bank of England’s continuing action to bring inflation under control, combined with strong competition amongst lenders to attract new business, are good indicators of recovery.”

By Jerome Smail

Source: Property Industry Eye

Britain’s biggest homebuilder hoping better mortgage deals could stimulate UK housing market

Marketing February 8, 2023 No Comments

The average selling price of a Barratt home was up 13.6 per cent to £372,000 in the second half of 2022. Britain’s biggest housebuilder said better mortgage deals could lead […]

The average selling price of a Barratt home was up 13.6 per cent to £372,000 in the second half of 2022.

Britain’s biggest housebuilder said better mortgage deals could lead a recovery in the market this year.

Barratt Developments said things could start easing, after reservations dropped 57 per cent in the final months of 2022 – following the disastrous Liz Truss/Kwasi Kwarteng mini-Budget which caused a meltdown in the markets and higher interest rates.

The Leicestershire-based housebuilder has adopted a cautious approach to the year ahead despite a 16 per cent rise in pre-tax profits in the second half of 2022 to £501.6 million (compared to the second half of 2021).

Total sales for the half year were up almost a quarter at almost £2.8 billion – thanks to a “significant step-up” in the average selling price – with the average selling price of a Barratt home up 13.6 per cent to £372,000. The number of new home sales completed was up 7 per cent at 8,626.

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The group – which is based in Coalville and includes Barratt Homes, David Wilson Homes and Barratt London as well as the Wilson Bowden commercial property arm – said it had seen a “modest uplift” in reservations this month, though they were still down 46 per cent lower on this time last year.

In recent months mortgage costs have gradually fallen back following actions to stabilise markets – including a new Prime Minister and Chancellor – and signs that wider interest rates may soon be peaking. Five-year fixed-rate mortgages are now available at below 4 per cent.

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Chief executive David Thomas said the “tremendous efforts” of its employees, sub-contractors and supply chain partners had helped it deliver a strong performance in the second half of 2022.

He said: “However, the economic backdrop has clearly been challenging and consumer confidence weakened significantly during the half, which meant we saw lower reservation rates for future sales – particularly in the second quarter.

“Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing.

“Our business remains fundamentally strong, both operationally and financially, with an experienced leadership team, a strong net cash position and a resilient and flexible business model.

“We are well-placed to navigate the challenges ahead and are focused on driving revenue whilst taking a decisive and disciplined approach to costs. As always, our priority is delivering excellent quality and service for our customers.”

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Barratt said if the recovery in demand continues, it expects to deliver total home completions of between 16,500 to 17,000 in 2022-23, down from 17,908 in the previous year.

But house prices are still under pressure with figures on Tuesday showing annual growth slowed to its lowest level in three years last month.

Halifax said the average house price is now more than £12,000 below a peak seen in August last year.

By Tom Pegden

Source: Business Live

Mortgage lending to top £310bn in 2022 despite ‘economic uncertainty’

Marketing December 22, 2022 No Comments

Mortgage lending is expected to hit £310bn this year, topping last year’s total, driven by high levels of remortgaging and a record year in the buy-to-let market, according to Intermediary […]

Mortgage lending is expected to hit £310bn this year, topping last year’s total, driven by high levels of remortgaging and a record year in the buy-to-let market, according to Intermediary Mortgage Lenders Association.

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Remortgages account for more than a third of gross lending, while landlord purchases are forecast to come in at £56bn, says the broker’s body in its ‘New normal – prospects for 2023 and 2024’ report. Last year it estimated overall gross mortgage lending at £304bn.

The study says “despite geopolitical and economic uncertainty” in an environment that has seen the base rate rise nine times over the last 12 months “the mortgage market has remained resilient throughout 2022”.

It adds: “Inflation will be a key factor determining the UK mortgage market’s prospects over the next two years.

“If consumer price index inflation remains above the Bank of England’s target in 2024, the Bank will remain under pressure to maintain or adjust the base rate in order to control inflation.”

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The report forecasts that higher interest rates will result in gross mortgage lending falling to £265bn in 2023 and £250bn in 2024. BTL lending will also fall to £47bn in 2023 “as a tougher economy weighs on the market”.

However, the study points out that in some areas the effects of the cost-of-living crisis on homeowners may not be as severe as expected.

It predicts that the number of households in negative equity will touch 16,000 by the fourth quarter of 2024, with an average negative figure of £4,300 per household, “despite many experts drawing comparisons between the current situation and the housing downturn of the 1990s, when up to 1.8 million households were in negative equity.

The report adds: “This is due to a lower proportion of lending at high loan-to-value ratios, rapid house price rises since the Covid-19 pandemic, and a greater uptake of capital repayment mortgages, meaning more borrowers have paid down their mortgage balance.

“These factors, combined with more rigorous lending criteria and enhanced lender forbearance, mean that actual possessions figures are expected to be less than half those reported in 2009.”

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The survey adds that the “lion’s share of mortgage business” in 2022 was conducted through intermediaries, with their share of distribution rising from 80% to 84%, “reflecting the advantages of lenders using these channels – namely lower fixed costs and the flexibility to control volumes”. Imla forecasts this share of the market will grow to 90% by 2024.

Imla executive director Kate Davies says: “After two years of global economic turmoil caused by Covid-19, 2022 was widely expected to be a year of recovery and a return to stability.

“However, the new normal appears to be uncertainty, with lockdowns in China continuing to impact supply chains, Russia’s invasion of Ukraine triggering rapid rises in energy prices, and political upheaval in the UK directly affecting mortgage rates.

“Yet, even in this context the mortgage market has remained resilient, with gross lending likely to reach £310bn by the end of 2022.

“Our report also shows that intermediaries are continuing to play a particularly important role in the sector, helping borrowers to find the mortgages they need as they try to move onto or up the ladder, or remortgage at a time when rates are higher than in recent years.

“Looking ahead, there will continue to be significant challenges facing the mortgage sector and wider economy.

“We expect persistent inflation and the Bank of England response to weigh on the market, which will have an impact on lending as buyers choose to hold off on moving home or investing in a buy-to-let property.

“However, where buyers are looking to secure their next mortgage, we have no doubt that the intermediary market will continue to support consumers and that a growing number of people will be turning to brokers to help them navigate the mortgage journey in these uncertain times.”

By Roger Baird

Source: Mortgage Finance Gazette