Following on from the Bank of England Money & Credit report published this morning, mortgage and finance experts share their thoughts:
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “This latest rise in consumer credit will trigger even more alarm bells at the Bank of England. It shows the economic storm clouds are getting darker by the day. People can take out credit and loans if they are confident, but in this case it’s almost certainly because they are seeking extra cash to cover their bills and put food on their tables. The drop-off in mortgage approvals is surprising as April and May have been exceptionally busy, although we do expect the combination of weaker borrower sentiment and lenders tightening their affordability to feed through in the months ahead. Remortgages, contrary to what this data suggests, are going through the roof as people seek to lock into the lowest rates available before they rise further. Perhaps the fact this data only shows remortgages to other lenders suggests people are increasingly being forced to remortgage with existing lenders due to affordability issues. All eyes are now on the jobs market and thankfully, for now at least, that remains fairly resilient.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com: “April’s rise in consumer credit shows the unprecedented pressure many households are under. All the signs suggest people are turning to plastic and loans simply to keep their finances ticking over. The fall in mortgage approvals likely reflects deteriorating buyer sentiment and tightening affordability checks. Buying a new home right now or upsizing is something a lot of people have marked as low priority. The drop-off in remortgaging doesn’t tally with the significant remortgage activity that is taking place and will leave a lot of brokers scratching their heads. The major challenges facing the market right now are a scandalous lack of stock, interest rate rises and what has rapidly become a brutal cost of living crisis. Affordability, or the lack of it, is set to be the defining narrative of 2022. The mortgage and property markets are now almost certainly past their peak and the health of the jobs market will be crucial in determining what happens next.”
Rob Peters, director of Altrincham-based Simple Fast Mortgage: “It’s never a good idea to cover the cost of living with debt such as credit cards or loans, as this creates a downward spiral of debt reliance which can only create further problems. It’s important that people who are struggling financially seek out the right support by speaking with any creditors and asking for ‘breathing space’ as well as taking advice from Citizens Advice or StepChange. That said, we’ve seen some borrowers with good credit ratings and strong affordability being turned down for additional borrowing by their existing mortgage lender. These borrowers have been forced to look at higher cost personal finance options such as unsecured loans in order to raise money needed. This indicates a lack of appetite by some mortgage lenders to allow borrowers to raise additional monies, at high loan to value ratios.”
Fanny Snaith, a Cheltenham-based certified money coach: “For people already with credit card debt, I see them increasingly looking to find a 0% balance transfer card to take the sting out of the APR. I am also seeing a lot more people searching for 0% on purchase cards. People are wanting to lock in cheap credit whilst they can. People’s financial wriggle room is getting tighter with their wages being stretched too far by soaring inflation. Even though credit is never a good idea to use for utilities and daily living, in the current climate a lot of people will feel they have no choice.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “The mortgage market is extremely busy, as is to be expected at this time of year. For those who can afford to, there’s no shortage of eagerness to buy now, rather than hold off. Many are actually bringing purchases forward, in the expectation that mortgages are only going to get more expensive and house prices will, at worst, stay roughly where they are now. And they may well be right. After all, this government always steps in to prop up prices when required with stamp duty holidays and help to buy schemes. The acid test will be what will happen if inflation remains high. The US Fed is expected to raise interest rates to 4% or 5% over the next year or so. What happens to house prices if the Bank of England has to follow suit? The property market could collapse like a Jenga tower.”
Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice: “We have been helping people with more second charge mortgages than in the past. This has mainly been for those wanting to borrow for home improvements. Since interest rates have been going up, it has been cheaper for them to borrow the additional money on a second charge and keep their main mortgage on the historic lower rates that they have. The intention would then be to refinance it all onto one mortgage when the fixed rate on their main mortgage ends.”
