Brokers discuss market conditions as clients feel the pressure
Higher interest rates, continued inflationary pressures and the uncertain economic outlook are leading to a rising number of mortgage arrears, according to Nationwide.
So, how are brokers navigating these choppy conditions for their clients?
How are brokers helping clients?
Justin Moy (pictured left), managing director at EHF Mortgages, said the issue lies in the impending expiration of a substantial number of products, roughly 1.4 million, between now and the culmination of 2024.
“When clients approach us seeking support, our method involves a thorough examination of what a lender can provide, encompassing basic Mortgage Charter support measures; beyond that, we delve into additional options based on the specific needs of the borrower,” he said.
The critical factor is the timing of seeking assistance - Moy said acting promptly not only ensures a more robust support system but also broadens the array of available options.
“In essence, the sooner one seeks help, the more comprehensive the assistance can be,” Moy added.
Going forward, Moy would like to see the Mortgage Charter stretch to a two-year window, which would align with the shortest product term for most lenders and facilitate the provision of interest-only payments. The rationale behind this proposed extension, Moy said, is to address prevalent economic challenges.
“The hope is that, within this extended timeframe, the economic landscape would have improved, possibly leading to more favourable mortgage rates,” he said.
While a six-month deferral serves to temporarily delay the problem, Moy said, many borrowers find themselves grappling with the question of what comes next once this deferral period concludes.
Therefore, he believes that advocating for a more substantial and proactive approach is imperative.
“Such an approach not only acknowledges the immediate short-term concerns but also seeks to provide a more enduring solution, ensuring a smoother transition for borrowers navigating these uncertain financial waters,” Moy said.
What are the options for clients?
Scott Taylor-Barr (pictured right), financial adviser at Barnsdale Financial Management, said, fortunately, he has not encountered clients reaching out about mortgage payment struggles.
“The absence of such calls is not entirely unexpected, considering that a 7% increase in arrears according to UK Finance, while noteworthy, applies to a relatively small segment within the expansive UK mortgage market,” he said.
By and large, Taylor-Barr said borrowers have demonstrated a commitment to prioritising their mortgage repayments over other financial obligations, diligently upholding their end of the payment agreements.
In instances where challenges arose, he said, borrowers took proactive steps, collaborating with lenders, and sometimes involving brokers.
Together, Taylor-Barr said they explored viable solutions such as term extensions or transitioning parts of the mortgage to interest-only arrangements.
“Importantly, amidst these adjustments, borrowers have consistently met their payment commitments, showcasing resilience and adaptability in the face of financial uncertainties,” he said.
It is crucial to acknowledge, Taylor-Barr added, that lenders are inclined to offer support to those genuinely in need.
The prospect of home repossession is a scenario lenders aim to avoid, he said, emphasising their preference for cooperative problem-solving.
As long as borrowers demonstrate a willingness to engage and collaborate, Taylor-Barr said lenders are motivated to work towards alternative solutions.
“This mutual commitment between borrowers and lenders underscores the importance of fostering a collaborative approach to financial challenges, reinforcing the idea that open communication and joint efforts are key to navigating potential difficulties in the mortgage landscape,” he added.
How have you navigated the rising number of arrears? Let us know in the comment section below.