Many clients are beginning to worry about the financial outlook
As economic conditions continue to worsen across the country, brokers’ customers are finding it harder to save.
The cost-of-living crisis, inflation and interest rate rises are all factors in the extended period of financial uncertainty.
“We are seeing our clients worrying about the cost-of-living increases across the country,” said Barry Webb, chief executive of Mortgage Saving Experts.
Webb explained that utilities are soaring and customers are worried about interest rate hikes because their largest financial commitment, their mortgage, could become unaffordable.
“I estimate 90% of our clients are fearful that monthly mortgage repayments could become unaffordable, however, I do remind people that we are still in a climate of historically low interest rates, following the aftermath of the last recession in September 2007,” he added.
As such, Webb said he advises people that the market is only seeing rates increase a little in comparison to 2007, when the Bank of England base rate was around 5.75%.
Webb also went on to note that due to the low-interest-rate environment over the past 14 to 15 years, lenders stress tested customers at a much higher rate to avoid overcommitting their customers.
Looking to what trends are arising from customers during this uncertain period, Webb said that many of Mortgage Saving Experts’ customers are asking to remortgage away from their current lender or rate, and are also requesting longer fixed terms.
“Mortgage Saving Experts have received a huge amount of enquiries for 10-year fixed rates in particular. This makes sense in many cases, but people must remember they may have Early Repayment Charges if they change their existing rate, either with the same lender or by remortgaging to another,” he said.
Although this can seem a good idea, Webb explained that in most cases it is not financially viable for the customer because they would change from a rate which was fixed for two years at 1.5%, pay the Early Repayment Charge, and then go onto a much higher rate which would no doubt be above 3%.
“This would be a very costly exercise for our customers, and they should be educated accordingly,” Webb said.
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Webb does expect market conditions to eventually improve, but he noted that the industry is going through a tough time at present due to demand.
According to Webb, the market is experiencing a “peak of epic proportions”, and he explained that the industry needs to maintain people’s expectations of how long the process will take.
“For example, I was remortgaging a client a couple of months ago, the lender sent the offer to the solicitor on June 6, 2022, and they did not start the conveyancing work until one month later,” he said.
Property prices have already started to stabilise, and Webb said he has begun to see a shift from people buying homes to enquiries regarding remortgage.
He said the market is currently very buoyant and that everyone within the industry is busy because the level of enquiries is unprecedented.
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Webb believes brokers can do more to help lenders and in turn assist clients through this difficult period.
“Lenders are under immense pressure. I know many lenders are offering overtime for their underwriters – they are employing more staff and even training existing staff to help with underwriting,” he said.
Due to the increased demand, Webb said that lenders are upping interest rates or withdrawing their entire range to put off some customers.
“I think advisers should be helping lenders get back to some form of normality by assisting them as much as possible. This can be achieved by brokers underwriting the applications at the outset and gathering all the information required first,” he explained.
Focusing on the future of the broker market, Webb believes it will be business as usual, and while he conceded brokers are working extended hours at the moment, he noted that given the climate, it is simply the nature of the beast.
“The broker market will always remain strong because 80% of all mortgage applications in the UK in 2021 came from mortgage brokers,” he said.
At the moment, Webb outlined that all brokers are inundated with enquiries and applications, but like anything in life, he believes this will slow at some point and become more manageable.
“There will always be a place for the broker because customers need advice. They will always need advice,” he said. “Therefore, there will always be a need for brokers.”
