Stubborn inflation, consecutive base rate rises, and a host of product withdrawals – we all know the first half of 2023 has been a challenging time for the mortgage market and particularly for borrowers. But past experience tells us that our sector has the ability to bounce back and overcome these difficulties. In fact, the evidence is there that the hurdles of 2023 could turn into speedbumps on our industry’s path to growth, and they may even provide an opportunity to invest in the future.
Making the turn?
The latest figures show that June saw inflation fall to 7.9%. While still high and well above the Bank of England’s target, it gives some cause for optimism that the central bank will not raise rates as sharply as previously expected. That will be a welcome relief for many borrowers who face the prospect of remortgaging later this year and beyond.
First-time buyers steaming ahead
Optimism is also creeping into specific parts of our market.
It’s easy to assume that those most affected by the wider economy and rising rates would have been first-time buyers. However, this is a market that has surprised us all with its resilience. In June, Legal & General Ignite showed a 14% rise in searches by advisers on behalf of first-time buyers, alongside a 17% rise in searches for minimum income requirements. Lender innovation bringing to market a host of first-time buyer solutions also suggests that some younger buyers are taking the opportunity presented by slower house price growth to step onto the ladder.
Affordability challenges remain though. Family and friends continue to be a constant presence in the mortgage market, gifting funds that buyers can put towards that all-important deposit. When we last surveyed buyers in 2020, a third (33%) said they intended on getting financial help from loved ones to buy a property over the next five years.
That financial support offered by the ‘Bank of Family’ is incredibly generous, but it’s also a sign that our housing market still isn’t working as it should. Investment in new homes across the country, including thousands of affordable properties like those Legal & General is supporting, will be critical to levelling the playing field for buyers who simply don’t have the financial support from family or friends to rely on.
Private Rented Sector
Despite predictions of a crash in the buy-to-let sector, my recent conversations with lenders and our latest data all point towards another resilient side of the mortgage market.
Legal & General Ignite data recorded a 32% rise in searches for multi-unit freehold blocks in June, and a 38% increase for products with the term ‘rental income’ included.
That is not to say the sector is recording peak performance, but landlords continue to drive their share of activity. For example, the proportion of lending facilitated by Legal & General Mortgage Club to landlords fell from 15% in June last year to 11% in June 2023 – a more normal level and evidence there is still plenty of activity.
There is every indication that many landlords are not selling to exit the market either. These are savvy individuals who are now looking to different parts of the country, away from London, that offer lower prices and better yields. The Northwest is a particular hotspot, while sectors including holiday lets remain a big driver of business.
A time to reflect
Where business pipelines are slowing, there is also opportunity. Until recently, advisers have been incredibly busy coping with post-pandemic demand. Now there is a chance to reflect on the future, and to think about where the next client could be coming from.
This means investing time in nurturing leads and reaching out to existing clients. Many will be looking at today’s economic challenges with concern about what this means when they need to remortgage. Others will have seen their circumstances change since they last fixed. A simple conversation could go a long way to help these clients understand their options and the changes they could make to ease any pressure on their finances.
There is significant press interest in the mortgage market and the recent Mortgage Charter should provide awareness and comfort to borrowers who may need support. As advisers, being there for your customers is what you do best, and it is more important than ever that you are there now.
There is also an opportunity to put the focus on investing in technology today that can help advisers thrive tomorrow. New tools are emerging all the time, and AI presents an exciting peek into the future of mortgage technology. This tech is there to help, not replace, and it could reduce the burden on advisers, giving them more time to support their clients with all-important advice.
There is reason to believe that we can rebound strongly and make 2023 a game of two halves. If we can keep calm and carry on, maintain a positive outlook, and invest in technology to transform the mortgage journey, we can ensure the difficulties of this year are only speedbumps on the path to a brighter future.
Kevin Roberts is managing director at Legal & General Mortgage Services
