Brokers will continue to be the mortgage market’s cornerstone
Despite the dual drags of high inflation and interest rates and what feels like a never-ending cycle of volatility, the property market has defied the odds and held steady. If not for the calm waters that the start of any year naturally brings, the property market continues to withstand surmounting macroeconomic challenges.
Despite the dual drags of high inflation and interest rates and what feels like a never-ending cycle of volatility, the property market has defied the odds and held steady. If not for the calm waters that the start of any year naturally brings, the property market continues to withstand surmounting macroeconomic challenges. However, as we enter 2023, more waves could be ahead. This year provides a unique opportunity for mortgage brokers to showcase the fundamental role they play in helping clients navigate the complexities of the market.
For those considering buying or moving homes this year, or even re-evaluating their mortgage options, the outlook for 2023 is slightly daunting. The Bank of England’s latest money and credit figures showed mortgage approvals for house purchases decreased to 46,100 in November 2022 from 57,900 in October, the lowest level since June 2020. Data from UK Finance also warns that 1.8 million borrowers are due to roll off their fixed term deal this year and will be faced with a repayment shock when they next remortgage.
These statistics point towards how vital brokers will be this year and their duty of care towards clients. However, it is still widely underestimated how valuable independent brokers can be in the remortgage process. Many homeowners often incorrectly assume that their cheapest option is via product transfer through their existing lender, when several other options exist that might cost less, be easier to manage, and have a more beneficial long-term standing.
UK Finance data expects to see around £212 billion of product transfers to take place this year, compared with an estimated £197 billion in 2022. This increase in product transfers over other methods of remortgaging is symptomatic of a misinformed consumer market and the current economic situation we are in. The cost-of-living crisis is severely impacting people’s affordability, and many homeowners are choosing product transfers rather than starting a new remortgage application to avoid having these financially sensitive conversations with their lender or mortgage broker. However, staying with an existing lender is usually not the best outcome long-term. Using a mortgage broker gives homeowners a holistic overview of products, rather than having tunnel vision with one lender.
Brokers can reach out to their clients to prevent any missed opportunities from slipping through the cracks. These conversations can happen several months before the end of the fixed term, which will not only help the client in preparing, but also allow some to have a remortgage offer locked in, up to six months prior.
Mortgage brokers also consider the fact that people’s circumstances have changed significantly over the past few years. An increasing number are now self-employed. Others might be more restricted with their personal finances and options compared to when they first secured their mortgage deal and now need a more affordable rate. Independent brokers are able to look at an individual’s circumstance on a case-by-case basis, offering bespoke advice and support to get them the best deal possible.
Finally, a defining characteristic of 2023 will be the mortgage market’s ability to adapt and match products with customer demands. As people look to secure more affordable mortgages, we expect long-term fixed rates to increase in popularity and more innovative mortgage products to enter the market. We are already seeing some 7- and 10-year fixes with varying break clauses. However, the end of buy-to-let tax relief, for example, will be difficult for those who secured their rates before tax incentives disappeared. And others, like first-time buyers, will be looking to the government for help following the end of the Help to Buy scheme, specifically through other security or incentive schemes. It would be useful to see if there are further plans to incentivise mortgage lenders to re-introduce affordable rates too, perhaps through a government backed scheme.
Ultimately, the continuing economic volatility in the UK and predicted recession over the coming months means the market will inevitably face challenges ahead. Yet as we’ve seen before, the market is resilient and will bounce back. Rates are already coming down quicker than expected. Through these downturns and periods of instability, mortgage brokers have been there to offer support, guidance, and encouragement that there are wider solutions available. It’s a new year, new market and new environment. Despite the doom and gloom headlines we see almost every other day, there’s still a lot to be positive about when looking at the resilience of our UK housing market and the duty of service mortgage brokers offer.