First-time buyers saw their completion rate for mortgage offers via intermediaries reach a three-year high of 89% in Q4 2018, according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA).
IMLA’s tracker revealed that the rate of completed mortgage offers for first-time buyers handled by mortgage intermediaries increased by eight percentage points in Q4 2018, to 89% from 81% in Q3 2018.
These figures are 20 percentage points higher than in Q1 2016, when mortgage brokers reported that only 69% of first-time buyer offers reached completion.
This rise in intermediary activity comes as UK Finance found that the number of first-time buyers securing mortgages in 2018 reached its highest annual level in 12 years. Some of the recent growth in first-time buyers has been attributed to the growth of Help to Buy (HTB) in allowing younger people to get on the housing ladder. According to the latest government figures, HTB fuelled around 1,000 home purchases a week in 2018.
IMLA said a competitive mortgage market, together with a strong jobs market and subdued house price growth, has also been a major factor in the continued growth in first-time buyer lending.
As well as strong first-time buyer figures, mortgage intermediaries reported stronger completion rates across the board in the last quarter of 2018. Q4 saw a five percentage point increase in overall mortgage completions, up to 87% from the previous quarter, and the highest overall reported completion rate recorded by the IMLA Mortgage Market Tracker. Remortgage activity also ended strongly in 2018 with quarterly figures for up by four percentage points in Q4 to 87%.
Buy-to-let lending was also more positive in Q4, even in the face of increased landlord regulatory obligations dampening the sector in 2018. Offers to completion rose three percentage points to 85%, according to intermediaries.
This positive trend for broker business looks set to continue in 2019 despite Brexit concerns. IMLA recently predicted that mortgage lending via intermediaries will rise to £169 billion this year as the share of lending introduced by intermediaries rises to 75% in 2019 and 76% by 2020, according to the 2019 IMLA report, The New Normal: Prospects for 2019 and 2020.
Despite these positive figures, the Mortgage Market Tracker found that broker confidence has ebbed a little as brokers continue to experience a Brexit ‘uncertainty effect’. Mortgage intermediaries recognise that Brexit has the potential to adversely affect their businesses, with the percentage of brokers who professed to be “very confident” about their own business falling from 60% to 54% in Q4 2018, the second dip in confidence in as many quarters.
The quarterly IMLA Mortgage Market Tracker – which uses data from BVA BDRC – examines consumers’ success rate in securing a mortgage via the intermediary channel, by tracking their progress from initial expression of interest (seeking a ‘decision in principle’) through to completion. In doing so, it compares the fortunes of first-time buyers, home movers, remortgagors, buy-to-let borrowers and applicants for specialist loans.
Kate Davies, executive director of IMLA, said: “It is encouraging to see that when an intermediary does apply for a loan on their client’s behalf, they are being accepted and completed at growing rates. Mortgages going from offers to completions are at more than three-year highs as intermediaries and lenders continue to find solutions for clients.
“It’s significant that intermediaries are able to demonstrate such a high success rate, especially when helping first-time buyers to navigate the complexities of an increasingly competitive and complex mortgage market. This is particularly true for those taking out Help to Buy equity loans, who may need even more expert guidance.
“IMLA predicts that mortgage intermediaries will account for a growing share of the mortgage market this year and into 2020. These figures underline our firm belief that, during times of uncertainty, people still seek out a seasoned expert to help guide them through complex financial decisions.
“That said, even in the face of such strong evidence about brokers’ effectiveness, it’s not surprising that brokers themselves share the current general uncertainty about the future. But, whatever the outcome of the current Brexit negotiations, we are confident that brokers will continue to play an essential part in guiding borrowers through the market.”