Increasing living costs, a chronic housing shortage and rising inflation have been highlighted as the main challenges for mortgage brokers in 2022.
House prices are at record highs and mortgage affordability is tightening as a result of inflation and the looming threat of interest rate hikes. Surges in energy prices also place an overwhelming strain on the cost of living for the average consumer and family.
The economic outlook presents obstacles for those in the mortgage profession, according to Albion Forest Mortgages managing director Mark Robinson.
Staying in touch with each of these markets is a full-time job on its own
“Rising living costs will be the greatest challenge of the next 12 months,” says Robinson.
“Lenders will be reviewing their affordability calculators to compensate. With rising property prices across the UK, still increasing at a huge rate, borrowers will likely be facing increased property prices with reduced lending.”
With house prices on an upward trajectory and household income stagnant, the number of properties readily available is also a growing concern among the broker community.
“One of the biggest challenges will be stock levels as we have a chronic shortage of homes for sale and nowhere near enough homes being built at the same time as an ageing and growing population, making the problem worse,” says Shaw Financial Services founder and mortgage expert Lewis Shaw.
Lenders are starting to design mortgage products for a new era of rising interest rates
“This will likely lead to prices still rising against the backdrop of tightening affordability and increasing mortgage rates.”
Mortgage Advice Bureau network broker Clare Jarvis echoes this sentiment, adding that the lack of stock is also having an impact on prices and this has led to a substantial number of ‘down-valuations’.
Property valuers are struggling to price properties as buyers enter bidding wars over houses worth far less than the asking price, she explains.
“Many houses are being sold in excess of the asking price, so valuers are struggling to find sold comparables to back up their valuations,” Jarvis says.
“Often surveyors return valuation reports with a value price that is far less than that of the purchase price and this has a significant impact on the mortgage options available to buyers.”
Lenders will be reviewing their affordability calculators to compensate for the rising cost of living
With the threat of rising inflation and hikes to interest rates to curb it, mortgage borrowers could start to seek refuge in the fixed-rate space, although brokers should also be mindful of new products, says Pitch 4 Finance chief executive and founder Miranda Khadr.
“For residential and buy-to-let borrowers, the obvious route would be fixed rates, but perhaps not in all cases and brokers should look out for product innovation.
“Lenders are starting to design mortgage products for a new era of rising interest rates after living for so long in a historically low-rate environment,” she says.
Brightstar financial group chief executive Rob Jupp says that, overall, mortgage brokers will likely find themselves juggling with striving for excellence in traditional product spaces and transitioning to multi-product capabilities across a variety of media.
“Increasingly, clients have more complex requirements that require specialist finance solutions through a variety of channels, including second charge lending, bridging, specialist buy-to-let and commercial,” he says.
“Not to mention the number of customers whose residential mortgage requirements now fall outside the criteria of the big high-street lenders.
One of the biggest challenges will be stock levels as we have a chronic shortage of homes for sale and nowhere near enough homes being built
“Staying in touch with each of these markets is a full-time job on its own and it’s impossible for brokers to be a single expert in all of the available options.”
However, Jupp warns that, as clients get savvier, brokers should be wary of diversifying before they’re ready.
“If brokers elect to go it alone and dip into different areas without the required level of knowledge and experience, clients will continue to get more sophisticated and may just find them out.”
