"Borrowers are leaning on this support as the market continues to grapple with the new interest rate environment and wider cost-of-living pressure."
New data from Legal & General's Ignite platform has revealed a notable spike in searches for interest-only mortgages, following the announcement of the Mortgage Charter in late June.
Searches for interest-only mortgage products jumped by 11% from June to July, following a 53% increase from May to June. This spike coincides with the announcement of the Mortgage Charter by the Chancellor of the Exchequer, Jeremy Hunt, on 26th June to support borrowers struggling to meet mortgage repayments.
Under the new Mortgage Charter, borrowers can contact their lender to discuss alternative options without it affecting their credit score, switch rates up to six months ahead of their current rate expiring and opt to only pay the interest due for a six-month period.
Additionally, searches for non-traditional construction properties grew by 9% in July. Meanwhile, searches for mortgage products that consider a property’s EPC ratings soared by 38% (following a 15% rise in June). This growing interest could be an indication of the increasing influence of the green agenda, as well as the heightened focus on household bills amidst the ongoing cost-of-living crisis. Searches on behalf of borrowers seeking the lowest minimum loan amount also leapt by 35%, with some seeking cheaper ‘first-stepper’ properties due to rising interest rates.
Additionally, the July data confirms ‘visa’ as the most popular criteria used by advisers searching on behalf of clients. This has held the top spot since October. Searches on behalf of borrowers with a visa softened marginally by 3.89% in July, following a 15% drop in June and considerable 28% uptick in May. Elsewhere, searches from expats not in the UK also dropped by 9% in July.
Overall, the number of mortgage searches completed by Legal & General Ignite users did fall marginally from June to July, a natural result of the summer season. This included searches for joint borrower sole proprietor and self-build mortgages dipping by 3% and 4% respectively.
Jodie White, head of mortgage products and transformation at L&G Technology, commented: “The uptick in searches for interest-only mortgages certainly characterised July and can be linked to the announcement of the Mortgage Charter the month prior. Borrowers are leaning on this support as the market continues to grapple with the new interest rate environment and wider cost-of-living pressure. We have since seen swap rates and interest rates stabilise, providing hope for more positive August and September figures. With many of us returning from a well-deserved summer break, it is an opportune time for advisers to reassess the technology at their disposal to help line up a successful final quarter.”
