Is the mortgage market burning out?

Having been impacted by a number of big developments in recent times, the mortgage market is undergoing a period of increased uncertainty.

The pandemic drastically impacted the market, preventing in person valuations for a time, to which the market answered by improving its technological systems and allowing for much of the process to be conducted online.

However, the cost-of-living crisis, inflation and rising interest rates have followed, which have further complicated the market and are leading to brokers working extended hours as deals have become more complex and time consuming.

“Right now, there is a lot of frustration and burn out in the mortgage market. There is also a degree of market uncertainty too,” said Jeff Knight, director of Grey Matter Marketing.

Knight went on to explain that much of this uncertainty and frustration revolves around how much further interest rates will rise, whether property prices will begin to drop and what impact that will have on the market, as well as how the energy crisis and overall cost-of-living challenges impact mortgage affordability.

Read more: What impact is the economic climate having on brokers' customers?

According to Knight, the industry as well as its customers are all waiting to see how a new prime minister will address these challenges.

“Within this uncertainty, the mortgage market remains extremely busy, with record levels of business and rapid lender price changes putting a strain on brokers,” he added.

Knight outlined that the economic situation does not yet seem to be biting in terms of enquiries, but believes it eventually will, with reports suggesting that the market is now starting to see a weakening in demand for new house purchases.

However, he noted that the rise in interest rates is the main area that is causing brokers a lot of headaches and challenges.

“Brokers I speak to have said that they still have clients who are moving due to the market changes brought about by the pandemic,” Knight said.

He went on to add that working from home seems to be giving more fluidity over where people live, with properties with outside space being required.

Then of course, Knight noted, that there has been a lot of remortgage and product transfer activity, some of which he said are cases brought forward as clients try to snap up rates now before they rise even further.

“There are still people wanting to raise capital to make changes to help them work from home,” he added.

Knight outlined that the demand is there currently, although he conceded the need to be pragmatic and noted that it may not be sustainable.

“Whilst demand is there, it is the economic impact on the mortgage supply side that is causing issues right now,” he said.

With rising interest rates, fluctuating SWAP rates and delays to lender servicing, Knight said he has seen plenty of last-minute rate changes.

These no-notice rate withdrawals, Knight outlined, are having a negative impact on brokers and their clients right now.

They are causing delays in transactions and also resulting in brokers working longer hours to try and meet the short deadlines given by lenders for the removal of their products.

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“Some lenders are finding ways to give broker-centric notice, others less so. Where clients are going through a purchase, this adds extra pressure already existing by a lack of property supply and bidding wars,” Knight said.

The challenges being faced right now can, Knight believes, be traced back to the stamp duty incentives which led to an overheated market.

Since then, he explained that the market has dealt with a deluge of demand and by focusing on the right here and now, has not been able to look at what is coming down the track.

Knight added that the stamp duty holiday was reactive and noted that the market has continued to see that with reactions to rate rises.

“Perhaps a market cooling will prove to be a good thing, in some regards, as the industry pauses for thought,” he said.