Fly on the wall

I’d love to be a fly on the wall of any brokerage upon them reading and discussing a headline such as ‘mortgage market set for quieter 2022 after unprecedented 2021’.

Fly on the wall

Sue Pedley is business development manager at Hanley Economic Building Society

I’d love to be a fly on the wall of any brokerage upon them reading and discussing a headline such as ‘mortgage market set for quieter 2022 after unprecedented 2021’.

This particular headline stems from a recent report by the Intermediary Mortgage Lenders Association (IMLA) which suggests that whilst gross lending hit £304bn in 2021, the trade body predicts this figure will fall to £275bn in 2022 - along with a drop in the total value of housing transactions, which amounted to £370bn in 2021.

The report also forecasts that gross lending in 2023 will fall to £265bn. Within this, IMLA expects that, due to higher interest rates and “broadly” flat house prices reducing demand, gross lending in the buy-to-let market, which came to £44.5bn in 2021, will fall to £38bn this year and £37bn in 2023.

In terms of the remortgage market, IMLA says that lending in 2022 will exceed the levels experienced in 2021, rising from £82bn to £89bn.

When it comes to distribution, the good news is that intermediaries are set to remain the dominant channel, serving nearly 80% of the market. While IMLA expects the intermediaries’ share of distribution to drop very slightly in 2022 and 2023, it forecasts that this too will remain near record levels – just below 80% of mortgage advances by value.

Some of these figures may seem disappointing on the surface but there is no question of 2022 being able to match the level of intensity seen throughout the purchase market over the past 18 months and this should not be viewed as a negative.

This period was somewhat of an anomaly as the stamp duty holiday drove the housing and mortgage market way beyond what seemed even remotely possible in Q1 2020.

During this time, brokers have become accustomed to the longest working days and it will be interesting to see how they react to more ‘normal’ working conditions.

Will they be thankful of a little more breathing room within their day? Have recent business volumes fuelled their appetite for generating more income? Are some going to look beyond the more vanilla residential purchases to make up any potential shortfall?

This leads to questions around how, where and when brokers may be looking at product areas and offerings which they may not necessarily have focused on previously.

So, what areas could and should they be looking more closely at?

Firstly, I’d like to pitch self-build into the mix as this is a sector which has experienced legislative and policy changes - including right to build and permitted development - result in growing demand.

When you also add increased lending on a wider range of construction methods and more competition/options materialising, it’s certainly an area for advisers to be taking note of.

As already highlighted, the remortgage market will play a much more prominent role in 2022 and a greater variety of specialist products which meet ever-changing self-employed and complex income requirements will continue to emerge and rise in prominence.

Brokers looking to support the growing number of borrowers who are falling just beyond some narrow mainstream lending boundaries should look to form closer relationships with lenders who can evaluate cases on an individual basis via an in-house underwriting team.

And this increased flexibility and ability to provide ‘alternative’ options is likely to be a key differentiator for intermediary firms that can no longer rely on ‘standard’ purchase business constantly knocking on their door.