"We are starting to see a gentle rise in consumer confidence which is steadily tricking down into the housing and mortgage markets."
It remains an ‘interesting’ time for the UK residential sector. Within this, there’s a strong sense of realism permeating through this space that the new higher interest rate environment is not going away anytime soon, with lenders and borrowers having to adapt accordingly.
This transitional period has placed many lenders and borrowers on the back foot, which has come as something of a shock after spending so much time of the front one. However, it’s certainly not all doom and gloom. Properties are still coming onto the market and being sold across the UK. Homeownership aspirations remain strong, lenders are keen to lend and the value of intermediary advice has never been higher.
To highlight the new interest rate ‘norm’, the average interest rate paid on newly drawn mortgages continued to increase, rising by a further 7 basis points to 4.63% in June. Similarly, the rate on the outstanding stock of mortgages increased by 10 basis points, and now sits at 2.92%.
This is according to the latest figures from the Bank of England, who also reported that gross lending increased for the second consecutive month, from £19.0 billion in May to £20.0 billion in June.
Net approvals for house purchases increased to 54,700 in June, the highest since October 2022. However, to maintain some perspective, it remains below the monthly average for 2022 of 62,700.
Approvals for remortgaging with a different lender saw a significant increase from 34,100 in May to 39,100 in June. This may indicate that a proportion of existing borrowers who would have settled for a product transfer rate for ease, are now willing to make the effort to switch lender to achieve a better rate, or apply for additional borrowing.
With a growing sense that inflation and interest rates are nearing their respective peaks, we are starting to see a gentle rise in consumer confidence which is steadily tricking down into the housing and mortgage markets.
As we all know, the strength and resilience of these markets has been all too evident in the wake of many ups and downs, although that’s not to say they are immune from a variety of economic factors.
One of these many factors revolves around the performance and make-up of the labour market, a performance which has also remained largely resilient. In Q2 2023, the UK employment rate was reported to have risen by 0.2 percentage points to reach 4.0%. This quarterly increase was mainly attributed to part-time employees, a trend which could be due to an increasing number of people taking on part-time jobs in addition to other income generating roles. Alternatively, it could be down to people being forced back into employment who may have retired, or parents returning to work earlier than planned, to cover rising living costs.
As a specialist residential lender, we have to constantly monitor how a range of borrowers are generating and supplementing their incomes, especially those who may sit beyond the more mainstream lending boundaries.
From this, it’s clear that the UK workforce has evolved to become far more fluid and flexible than in years gone by, whether through multiple and/or unusual income sources, self-employment, contractors, the rise of the gig economy etc. Then there is the more stable element of this labour force, key workers who remain the life blood of the public sector.
By connecting with lenders who have the flexibility to consider up to 100% of those additional incomes, and manually underwrite cases based on their merits, mortgage brokers will be able to offer their clients a broader choice of lenders and maximum loan amounts.
Whatever their role, how they generate their income and even their location, it’s vitally important that all credit-worthy borrowers can access mortgages which meet their specific needs. Unique borrowing demographics require a specific product proposition and this is why specialist residential lenders who can offer such a breadth of solutions are set to enlarge their market share moving forward.
