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UK Finance Report warns of ‘softer mortgage market’ but does it go far enough? Brokers respond

by | Dec 12, 2022

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This morning’s UK Finance report about mortgage forecasts has predicted a ‘softer mortgage market in 2023, as affordability comes under pressure from inflation and rising interest rates.’

But, many experts having been asking whether this analysis really goes far enough or whether the problems facing the mortgage market are rather more concerning? Mortgage experts are certainly not holding back with some strong views in reaction to the content of today’s announcement, as follows:

Samuel Mather-Holgate, IFA at Mather and Murray comments:

“This report made me spit my cornflakes out. It was like Jimmy Carr was reading it. Firstly it offers no comment on the shambolic Truss government which, for mortgages, was like an atomic bomb. Then it goes on to suggest, despite one of the most severe recessions on record predicted, unemployment will remain low. I’m not sure which privileged economist was commissioned to research this, but they must be truly out of touch with what is going on in the real economy for those on modest incomes but with housing debt.

Like Mather-Holgate, Hannah Bashford, Director at Model Financial Solutions Ltd. also sees big problems ahead as she comments:

“The combination of interest rate rises, inflation and the cost of living crisis are all going to affect the housing market and it is going to be harder for people to borrow what they need to buy property. People coming off low or ultra lowinterest rates are going to have less disposable income. The optimistic view of unemployment may be misplaced and this will have an impact on repossessions. I find it interesting that even the outlook for 23/24 repossessions is far lower than we saw in 2011/12, which is good but may just be a result of catch up from the courts, not a realistic indication of people being able to afford their mortgage. Now more than ever it is important to get advice and make sure you have the best deal. If you are struggling to make payments, get advice on the options available so repossession and arrears are avoided.”

Lewis Shaw, Owner and Mortgage Broker at Riverside Mortgages sees today’s market as a culmination of years of ultra low interest rates and a benign inflationary environment as he comments:

“This report states the obvious. Rates have increased, living costs are hitting people, and repossessions are tracking upwards. If you print billions of pounds and give it out, eventually it shows up in increased asset prices and inflation, and this is where we are. All of this is entirely predictable given the past two years of abnormal markets due to Covid, historically low mortgage rates and stamp duty tax breaks. We’re going back to a regular mortgage market as we saw in previous years, and there’s bound to be an increase in bad debt and arrears across the board as many people, rightly or wrongly, have lived beyond their means in an ultra-low rate and inflation environment for a decade. There was always going to be a reckoning; it’s just a shame it’s all coming at once.

Marcus Wright, MD at Bolton Business Finance is already seeing the writing on the wall too as he comments:

The UK Finance prediction of a 27% decline in lending to landlords is pretty much in line with what we are already seeing in the market. Many buy-to-let mortgage applications are not progressing further, once they see how much the interest rate will be. Fixed buy-to-let rates are in many cases double what they were 12 months ago, making many property investments not viable. This will no doubt feed into house prices, along with reduced household purchases.

Justin Moy, MD at EHF Mortgages, is worried about trouble ahead for property owners as he comments: “This is further recognition that we have some tough years coming up for those looking to buy a property, with pressure on mortgage rates and overall expenditure costs set to be more pronounced in 2023/4. A significant amount of mortgages will be Product Transfers, especially Buy to Let, as affordability assessments may prohibit any other option. I hope that lenders don’t see this as an opportunity to increase margins for those product lines.

For Imran Hussein, Director at Harmony Financial Services, the report doesn’t reflect the risks that lie ahead as he explains: “The report makes no mention of Kamikwasi and Trussonomics and the effect they have had on the property and mortgage market. I think most expected a slightly slower 2023, but the fact there is no mention of the effect of the mini-Budget is absurd. Also, the expectation that the vast majority of people will be able to keep up with their mortgage payments seems disconnected from reality. We are entering a period of unprecedented economic uncertainty, not a slightly bumpy ride.

Gary Boakes, Director at Verve Financial highlights the important role for mortgage brokers next year as he comments: “With affordability assessments tightening, it is going to be more important than ever to speak with a mortgage broker. Lenders are already making differences, with some pushing Product Transfers to six months and with the ability to review and cancel rates if the market was to drop, which is only going to make life easier for customers. It is going to be so important that customers engage with a mortgage broker as early as they can so they can take advantage of any rate changes to ensure they have the best deal possible.

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