Deciphering the current state of the UK mortgage market could take the equivalent of a PhD at the moment, given its complications, who it currently favours, who it might favour in the future, what house prices/interest rates/supply/demand are all doing, and of course not forgetting the rather sizeable impact of both its regulators and the politicians of the day. Thrown in the dreaded B-word, ‘Brexit’, and you add another layer of complexity which you might ordinarily hope to avoid, but there you go.
Advisers of course have to steer clients through all of this and while we stakeholders tend to keep a close eye on what’s happening and how it affects our businesses, clients themselves might only be picking up snippets here and there. Which means when they come to you looking for a sub-1.5% fixed-rate but they’ve only got a 10% deposit, or they have multiple income sources, or they have arrears in their past, then it can become an even trickier market to navigate.
What we might well do is look at the areas in which demand is at its greatest and decide to concentrate our efforts there. The latest UK Finance lending statistics for February – which admittedly already feels a long time ago – do provide some idea of the growing trends within the UK mortgage market, and it will perhaps be of no surprise to see that both remortgaging – residential and buy-to-let – continues to lead the way and provide the considerable foundations on which the market is based.
There has also been much talk about the increasing amount of support for first-time buyers and whether this might actually translate into greater levels of purchasing. The cut to stamp duty – introduced in England and Northern Ireland last November – was (by the time of the Chancellor’s Spring Statement) supposedly meant to have resulted in 60,000 first-timers purchasing in the intervening months. Whether any of those were motivated to purchase because of the stamp duty changes is however a completely different matter altogether.
But, perhaps it doesn’t really matter, with the number of first-timers hitting 25,200 in February, 2.4% up when compared with the same month in 2017, while perhaps of real interest is the number of home-movers. There has been an underlying feeling that first-timers have profited from a raft of Government measures, but it has neglected those further up the ladder that might be having considerable difficulty moving on. After all, if those houses are not freed up, and we continue to build the same number of homes that can be accessed by first-time buyers, then at some point there will be no stock for the new blood to buy.
The UK Finance statistics suggest the problem might not be as deep as we thought, with February’s 24,800 home movers remaining unchanged from the previous year. It is however particularly interesting that first-time buyers now outnumber home movers when this has not been the state of affairs for many, many years. If home mover numbers do continue to slide – as looks likely – then we are in danger of the housing market slowly grinding to a halt in the months and years to come.
This does seem to chime with our own figures – over the course of the last six to eight months, first-time buyer purchase numbers have stayed relatively steady between 40-50%, but then you add in buy-to-let purchase of between 10-15%, and you can see the number of home mover numbers is undoubtedly below first-timers – historically not a place it has been, certainly over the past couple of decades.
So, where does this leave us? Well, clearly at present we have a dominant remortgage market – not forgetting the opportunities that exist in the product transfer sector; a growing first-time buyer opportunity – with the Government showing no signs of pulling back in terms of its commitment to it; and a number of other specialist areas, notably later life lending/equity release, which are likely to see continued growth in the months and years to come.
Client demand for mortgages in most areas is not falling back, except perhaps home mover; even buy-to-let purchases seem likely to rise as professional and portfolio landlords get to grips with the new taxation environment they’ve been placed in. Plus, when interest rate rises appear to be inevitable – although the big question is when – then clearly there will be many interested borrowers seeking to lock into competitive rates before they slip away. Perhaps forever.
On top of this, advisers not only have the mortgage opportunity, but everything else that comes with it – we’ve just revamped our residential cashback remortgage offer and introduced a similar fixed-fee offering for buy-to-let remortgaging. This is a part of the market that looks unlikely to fall back anytime soon; indeed as people stay in properties longer and landlords look to hold onto them, this appears to be a thriving opportunity. When you’re not seeing clients for two, perhaps three, years it’s the perfect time to reassess their changing needs and ensure they have access to all their needs, be it protection, GI, conveyancing, you name it.
In that sense, the market remains heavily in the adviser’s favour – it’s up to you to handle the twists and turns that always come with our market.
Harpal Singh is managing director of Broker Conveyancing