Following today’s Bank of England Money & Credit report (May) issued this morning, mortgage brokers comment on the data and reveal that they’re still finding demand for mortgages remains strong:
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “May was a crazily busy month on the mortgage front and this data underlines that. The mortgage approvals data also shows that people are still actively borrowing, even amid the cost of living crisis.
“A lot of people want to buy before rates rise even further and the FOMO on the rates currently available is incentivising a lot of people to take action. Rates are rising at a rate of knots and people are getting in while they can, and fixing for as long as they can, whether through a house purchase or a remortgage.
“People who have been procrastinating are now very proactive. All they read about is rates heading north and that is driving them to act and act now. It’s a trend we expect to continue in the months ahead.”
Imogen Sporle, Head of Term Finance at London-based Finanze: “Demand has still been very strong in recent months. I think many in the mortgage industry were shocked when demand did not drop off after the deadline for the stamp duty holiday.
“Based on that, I think mortgage demand will still be high in the second half of the year, more so among landlords and investors rather than first-time buyers due to the cost of living crisis. Bizarrely, perhaps, it is often easier to secure a mortgage now compared to a year ago.
“We are seeing more lenders offering higher income multiples, being more flexible on the amount of time you have been employed or self-employed and generally being far more flexible around adverse credit. Secured loans, or ‘second charges’, are becoming more common for debt consolidation.
“Many households are having a difficult time and are using secured loans to consolidate unsecured and credit card debt so they can repay this over a longer term and create more disposable income to spend on the bare necessities.
“Almost every credit report I see now has some form of adverse credit, it is a rare and wonderful surprise to see someone with perfect credit and I know many adverse credit brokers who are absolutely overrun with applications at the moment where most of the credit scores are 200 out of 1000. There’s no question now that more people will be entering a period of real financial difficulty.”
Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages: “Demand for mortgages remains extremely high. However, this is mainly due to clients trying to secure new rates as soon as possible due to the fear that they will keep on rising. We’d expect the second half of 2022 to remain much the same with people rushing to secure new deals before rates rise further.
“The criteria of lenders are constantly evolving and with the rising cost of living this is certainly going to impact lenders’ decision on how much they will potentially lend a customer. We’re also starting to see more borrowers come who have had a reliance on revolving credit such as credit cards to fund their everyday living off the back of the cost of living crisis.
“This could soon become a slippery slope for many who may struggle to find their way out of that debt. The number of people in financial difficulty is sure to start snowballing soon. Many people are already in difficulty but are burying their heads in the sand or trying to fund everyday living on credit cards, which could end in disaster.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com: “So much for the cooling of demand for property after the end of the Stamp Duty holiday. Even amid the cost of living crisis, demand is strong, as reflected in the fact that approvals nudged up very slightly in May.
“Remortgage activity is particularly strong, as people seek to lock into the lowest rates possible ahead of further rate increases this year. Fear around the direction of rates and the desire to fix is proving a formidable driver of mortgage activity.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “Demand for mortgages has been robust for the past few months, although a drop off in approvals may materialise in the months ahead as steam is taken out of the property market by a lack of stock, rising inflation and increasing mortgage rates.
”Thankfully, the actions taken by regulators and central banks after the Global Financial Crisis means that lenders are well capitalised, so we’re not going to see a replay of the Credit Crunch. However, mortgage affordability is starting to be squeezed as lenders update their ONS figures due to the cost of living crisis. This isn’t bad because if people can’t borrow as much, it will naturally lead to a levelling-off of house prices, which is sorely needed.
“The outlook for the next half of the year is going to be thousands of debt consolidation remortgages as people look to clear their balance sheet with the newly found equity in their homes. This would allow people to increase their monthly disposable income at a time when things are getting tight. That said, it’s not appropriate for everyone so always talk to a broker about your circumstances and be guided by what they say.”
Fanny Snaith, a Cheltenham-based certified money coach: “I’m seeing more and more people wanting to increase their mortgage to clear their debts. They think that if they can secure a lower mortgage now and clear the decks of debt, they can move forward with a clear head. Robbing Peter to pay Paul comes to mind but for some this seems the best option. Hang on to your hats for the winter months.”
Mark Robinson, Managing Director of Southampton-based Albion Forest Mortgages: “Like this data, our latest figures indicate an increased level of enquiries as well as an increase in mortgage offers, so people are certainly still buying. We are definitely getting more enquiries for support schemes such as Joint Borrower Sole Proprietor or Gifted Deposit, as house prices are rising so quickly and wage increases remain stagnant.
“The bottom line is, people still need places to live, and rents are still going through the stratosphere, so Mum and Dad are stepping in even more to help their children get onto the property ladder.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “We’re expecting mortgage demand to drop considerably in the second half of the year. The noises from the Bank of England indicate we might get a 0.5% increase in the base rate on August 10th. And some analysts are suggesting the base rate could be as high as 3% by the year-end. If that comes to fruition, mortgages will be unaffordable for a lot of first-time buyers, and house prices will start falling fast.
“The banks will probably be OK, thanks to tighter financial regulation and increased liquidity controls. But it’s the general public who will once again pay the price of our extended addiction to cheap credit.”
Robert Payne, director of Bristol-based Langley House Mortgages: “We expect to see a lot more borrowers asking to lengthen their mortgage terms to reduce the monthly payments in the months ahead. I also think we may see an increased number of owners requesting consent to let their property and moving back in with family, rather than climbing the property ladder as they would have done previously. The current inflationary climate is brutal.”
David Robinson, chartered wealth manager at Wildcat Law: “Scrapping affordability tests now, just at the point they are most needed, is a bit like chucking the parachute out as your plane engine stops.
“The argument is that multiples of earnings are perfectly fine, just as they were during the Credit Crunch. Affordability calculations were introduced post Credit Crunch because part of the failure in the mortgage market was down to just looking at mortgage multiples. Affordability calculations take into account the other myriad expenditures a household may have.
“This is especially relevant now as we know that everything from household utilities to the cost of school uniforms is going up. This will increasingly squeeze family budgets and make income multiples less and less accurate as a measure of risk and affordability. Welcome to the lending Wild West, where Banks are once again able to police themselves.”
Rhys Schofield, managing director at Belper-based Peak Mortgages and Protection: “At the coalface, things certainly aren’t slowing down. Lenders are pricing themselves out of being competitive to cope with demand and everyone seems to be just as busy.
“One area we really are seeing more focus on though is green mortgages, as utility bills become more of a concern for household budgets and research is beginning to identify a pattern that an energy-efficient home is worth around £16,000 more on average.
“I’d expect that differential to widen as more people want green homes that are cheaper to keep toasty.”