How should brokers adapt to the UK’s ever-changing housing market?

Plus: how technology is helping

How should brokers adapt to the UK’s ever-changing housing market?

Rising inflation, increasing interest rates and the cost-of-living crisis are all changing the shape of the UK’s housing market—and mortgage brokers are having to adapt. The COVID-19 pandemic, while responsible in part for some of these changing conditions, also benefitted the mortgage industry by accelerating growth of next-generation technologies. Here is what you need to know about specific changes to the UK housing market and how brokers are adapting.

Why is there a need to adapt and change?

The housing market in the UK has dramatically changed shape over the past five years, forcing brokers to adapt and rethink their model. The housing market has changed shape due to myriad factors, including the economic impacts of Brexit and the COVID-19 pandemic as well as legislation, rising inflation, and increasing interest rates. And the need to adapt and change goes beyond merely going digital.

One commonly cited need is the current slowdown in the buy-to-let market. This is especially an issue with the increasing cost of living placing a strain on affordability. While competitive bidding among buyers remains stable, there is uncertainty around the potential for the market to cool further. For the sales market in particular, multiple factors indicate that brokers may have to change tact—for instance, the high cost of living, in addition to the aforementioned rise in inflation and interest rates.

Another factor forcing brokers to adapt is the lack of supply in the rental and sales markets, meaning rents and purchase prices are running wild. For clients who are hoping to purchase properties, this likely requires mortgage brokers to work a little more closely with them. 

How has technology helped brokers adapt?

Next-generation technology accelerated by the COVID-19 pandemic has had a significant impact not only on the UK housing market, but how brokers do business. Apps and online platforms have revolutionised how clients manage their affairs, as well as improve transparency, allowing brokers to engage with clients more responsively.

For mortgage brokers, one of the biggest challenges is managing separate conversations and pushing them forward, to complete an enquiry. Online platforms have brought this process, usually done by phone and email (still perfectly viable options) into the 21st century, providing brokers with one single location to manage all conversations. These platforms also give brokers direct access to third parties such as the HMRC or the Office for National Statistics, as needed, during the enquiry process.

Next-generation platforms that are designed for mortgage brokers ensure that they have access to thousands of mortgage services and products. In other words, instead of having to reach out to every individual lender, mortgage brokers can utilise these platforms to quickly scan through the innumerable services and products available. This especially allows brokers to better tailor the services and products to their clients’ needs.

Will house prices stabilize? 

With longer-term mortgages, rising inflation, increasing interest rates and a potential recession threatening a housing market crash, some are asking whether house prices will stabilize. Experts agree that a full-blown crash, burst bubble, or otherwise significant drop in home prices remains unlikely since homebuyer interest is still steady.

In fact, property demand remains 25% higher than average over the past five years and is on par with year-on-year figures, according to Zoopla’s House Price Index for July 2021. After a stamp-duty led home-moving surge in 2021, a significant mismatch between supply and demand of homes remains. In particular, the housing stock is low. That imbalance has seen home prices rise year on year last June by 13%, which represents the highest rise since the end of 2004.

Despite this, however, home price growth is expected to remain stable for the remainder of 2022. While slower growth is expected, it is not expected to be significant enough to have any major impact on house prices.

Having said that, a surge in mortgages is also predicted. This is due, in part, to five increases to the Bank of England base rate, spurring mortgage interest rate increases. Mortgage lenders are poised to increase their rates after last summer’s 1.75% hike, which was the sharpest increase in over 25 years. Typically, there are more mortgage applications when interest rates change. For these reasons, the wisdom is not to rush out and get a mortgage over the next few months.