Expert discusses the key challenges for brokers in the coming year
A new year is on the horizon and many mortgage professionals will be looking ahead, after yet another difficult 12 months.
So, what are the key issues likely to be faced by the property market in 2024 and how can brokers make the most of the year?
As inflation falls, Jo Breeden (pictured), managing director of Crystal Specialist Finance, pointed out that it remains far from the Bank of England's 2% target.
“The central bank anticipates the base rate to persist at 5.25% until the close of 2024, later dropping to approximately 4.25% by the conclusion of 2026,” he said.
Breeden added that this implies no positive movement for at least a year; however he noted the Monetary Policy Committee is set to convene before Christmas.
Additionally, he observed the stabilisation of swap rates, citing two-year rates at 4.7%, marking a 0.5% increase from the same period last year.
Looking ahead to 2024, Breeden took into account an impending energy price rise and the backdrop of a general election year.
“Forecasts also predict a continued decline in house prices, with the Office for Budget Responsibility estimating a decrease in disposable income as 1.6 million households transition from fixed-term deals,” he said.
Despite the challenges, Breeden believes there are opportunities for brokers who recognise that every hurdle in 2024 can potentially unveil new prospects.
How can brokers make the best of 2024?
For starters, Breeden said it is essential brokers gain the trust of their clients, to provide them with advice and guidance they will listen to.
“Clients need to understand that 1% rates will never return, and they need to reset their expectations,” he said.
As such, Breeden added that brokers must educate their clients on historical rates and support them in rebalancing their budgets.
“For those with high levels of unsecured debt, consolidation through a second charge could protect their high street status,” Breeden said.
Communication with clients, he continued, will also be key next year, and so he believes brokers should diarise contact.
For clients coming off fixed terms, he recommends speaking to them at least six months before their deal ends.
For bridging clients, Breeden said that their next move, whether they need more time and a re-bridge, as well as their exit strategy, must be discussed early.
Discussing mid-term clients’ financial situations, the management of unsecured debt, and if a second charge could help them to reduce their monthly outgoings, should all be covered in January.
“The ongoing cost-of-living crisis and changes to working patterns, mean that more and more clients are going to be rejected by high street lenders,” he said.
An estimated 28% of those with non-standard incomes have had a mortgage application rejected, of which 46% were on zero hour contracts, according to The Mortgage Lender.
The research also showed that over half of borrowers now have at least one ‘non-standard’, or specialist, criteria.
In reality, these borrowers, or prospective borrowers, Breeden said, are credit worthy and can often be assisted by specialist lenders, who take a more pragmatic approach to a client’s financial situation.
“The downturn in the property market is the ideal scenario for professional investors, enabling them to pick up bargains either in the market or at auction,” he added.
Property prices, Breeden observed, are forecast to continue to fall next year, and auction sales are on the up.
“As such, bridging finance is the ideal vehicle for investors to pick up bargains given its flexibility and versatility,” he said.
Rates, Breeden added, are also highly competitive and available as second or even third charges for borrowers.
“Bridging is becoming a mainstream product to support professional investors with their expansion plans,” he said.
Economic conditions, Breeden believes, will be tough next year, and many small businesses will require working capital to see them through. So, he said brokers must ensure that they are in regular contact with their small to medium-sized enterprise (SME) clients.
Moreover, Breeden said that commercial finance can be vital to support working capital, and he believes it is not just there to help business owners buy their premises.
“Though at a time of increasing rents, it is certainly something you should be talking to your SME clients about,” he added.
Commercial finance, Breeden said, can be used in any number of ways to support SMEs where the property is used as a security against the loan, including asset and invoicing finance.
Lastly, Breeden suggested brokers must take the opportunity to prioritise themselves and manage their emotional pressures and mental wellbeing.
“The Mortgage Industry Mental Health Charter (MIMHC) champions mental health and wellbeing in our industry; if your company does not have a mental health framework in place, ask them to get in touch with MIMHC about joining,” he said.
If you are struggling, Breeden said, you should never do it in silence and must reach out to start a conversation.
So, while 2024 will again be a challenging one for mortgage brokers, Breeden said it could also be a successful one for those who are willing to face new opportunities.
“In our last Annual Broker Survey, 70% of brokers said that you planned to diversify in 2023 and explore new markets, do not be one of the 30%,” he said.
What challenges and opportunities do you think 2024 will hold for the mortgage market? Let us know in the comment section below.