New research from the Intermediary Mortgage Lenders Association (IMLA) has found that brokers are encountering fewer difficulties when sourcing mortgages for clients than at any point since the introduction of the Mortgage Market Review (MMR) in April 2014.
30% of mortgage brokers reported that they encountered no problem sourcing a mortgage for any type of client in the second half of 2016 – up from 26% in the first half of the year, and double the rate recorded a year earlier in the first half of 2015 (15%). IMLA says this is a clear reflection of improving lending conditions, and a sign of the continually strengthening relationship between mortgage lenders and brokers.
Brokers also reported an uptick in successfully sourcing mortgages for a variety of different groups of borrowers. The rate of brokers who said they were unable to source a mortgage for first-time buyers fell from 29% in the first half of 2016 to 16% in the second half of the year, while the proportion who were unable to source a mortgage for standard status borrowers also fell from 26% to 15% over the same period.
Conditions were also reported to be softening for borrowers who sit outside of the mainstream mortgage market. The rate of brokers who were unable to secure a mortgage for borrowers who are self-employed or have irregular incomes fell from 50% in the first half of 2016 to 25% in the second half, while the rate for those unable to source mortgages for interest-only borrowers fell from 52% to 31%. Furthermore, there was also a substantial fall in the rate of brokers who were unable to source a mortgage for borrowers looking for mortgages lasting into retirement, which fell from 43% in the first half of the year to 29%.
The increase in brokers successfully sourcing mortgages for a greater proportion of clients is set against a backdrop of falling average mortgage rates. The Bank of England reported that the average two year-fixed rate mortgage at 75% loan-to-value (LTV) fell 45 basis points (bps) from 1.90% to 1.45% between December 2015 and December 2016 – enhancing consumers’ affordability.
Table: proportion of brokers unable to source a mortgage for different clients in preceding six months.
| Feb 2015 | Jul 2015 | Feb 2016 | Jul 2016 | Feb 2017 | |
| Standard status borrowers | 23% | 25% | 22% | 26% | 15% |
| Near-prime borrowers | 26% | 22% | 21% | 28% | 18% |
| Adverse credit borrowers | 54% | 49% | 46% | 54% | 46% |
| Self-employed borrowers/borrowers with irregular incomes | 46% | 47% | 40% | 50% | 25% |
| ‘Lending into retirement’ borrowers | 50% | 51% | 43% | 43% | 29% |
| Interest-only borrowers | 54% | 51% | 39% | 52% | 31% |
| First-time buyers | 21% | 20% | 21% | 29% | 16% |
| Buy-to-let borrowers | N/A | 22% | 22% | 33% | 34% |
| No problem for any client in the last six months | 16% | 15% | 26% | 26% | 30% |
Peter Williams, IMLA’s executive director, said: “It is hugely encouraging to see a greater number of brokers are reporting that they are successfully arranging mortgages for a wide variety of clients. Over the past few years, regulations like the Mortgage Market Review (MMR) have raised the bar in terms of borrowers’ requirements, which some predicted would leave many borrowers locked out of the market. This new regulatory regime has made the intermediary channel more important than ever, and brokers are clearly doing a great job of helping people get a foot on the housing ladder.
“House prices have been growing faster than incomes over the past few years, which has challenged affordability. This issue has been particularly acute among first-time buyers, which means the fact that just 16% of brokers reported they were unable to source a mortgage for someone in this group over the six months is very positive news. Low mortgage rates have continued to support borrowers’ affordability by reducing monthly payments.”
According to IMLA’s research, both lenders and brokers alike viewed the remortgage market as having the best prospects for growth in 2017, followed by lending to first-time buyers. The remortgage market has grown considerably over the past year, with homeowners looking to tap into growing equity and to take advantage of the low rates available to them on the market. According to the CML’s latest data, homeowner remortgage activity increased by 22% in value (From £5.8bn to £7.1bn) and 21% in volume (from 33,200 customers to 40,300) in the 12 months to January 2016.
In terms of developments in mortgage availability for the remainder of 2017, lenders viewed borrowing-into-retirement as the segment of the market with the biggest prospects for growth, with a total of 83% of lenders anticipating that there would be greater availability of mortgage finance to such individuals. The area of the market chosen by brokers to have the greatest increase of availability over 2017 was lending to landlords using a limited company vehicle, with 65% envisaging growth potential.
Williams added: “The low rate environment is ideal for existing homeowners looking to switch onto a better mortgage deal, and it is no surprise that both lenders and brokers foresee significant increases in this part of the market. While mortgage rates look as though they might have bottomed out, any increases are likely to be minor and will still be conducive to remortgaging activity.
“It is also positive to see that lenders predict greater availability for customers looking to borrow into retirement. This part of the market has been underserved in recent years, and it is vital that this growing demographic has access to the mortgage market.”
