Specialist lender suggests it could start to ease
With inflation falling and a reduction in the Bank of England base rate much anticipated, the mortgage industry can arguably be optimistic that the sector is entering a more positive period.
That sense of anticipation will likely be widely shared by borrowers, whose affordability has felt more precarious than it has in generations.
The affordability challenge, which has blighted many homeowning dreams recently, could… whisper it quietly for risk of jinxing it… be about to ease, according to Niamh Downey, from Bluestone Mortgages.
Downey (pictured), who is head of business development at Bluestone, reports a strong start to the year for the specialist lender - an increase of 82% for new business volumes compared to Q1 2023. It bodes well, particularly if the apparent upturn in the economy continues.
“In terms of the broader market, we’ve started to see appetite return and the general tone has been more optimistic,” Downey acknowledged. “However, we have to remain resilient as there is still volatility in the market when it comes to swap rates and fixed rate pricing.”
Pointing to a predication from the trade association UK Finance of a 5% drop in gross lending and 8% drop in house pricing, she added:, “Affordability is still very much stretched at the moment, and this is one of the main challenges our customers are facing when securing a mortgage. With inflation on its way down, and expectations of interest rate cuts, we hope customers' affordability issues will start to ease.
“From a product perspective, while affordability remains present, customers will face challenges with remortgages and first time-purchases. However, we expect to see a shift away from a heavily led product transfer (PT) market towards remortgaging as lenders rates become more competitive.”
What will the mortgage market be like in a year?
Downey is not alone in hoping that in 12 months’ time the market will be stabilised - or stabilising - with a settled base rate.
“As such, I hope that we will be in a market where mortgage rates are steady, affordability has eased, and confidence has returned,” she reasoned.
Meeting the needs of adverse credit and complex cases, Bluestone’s range of products has been designed for people who don't fit the traditional customer profile of mainstream lenders, possibly because they have encountered unforeseen financial issues. It does not credit score, nor charge application fees, and accepts those with IVAs (individual voluntary arrangements), DMPs (debt management plans), or who have experienced bankruptcy.
“With our innovative underwriting processes and flexible lending criteria, we make it possible for individuals who have previously been turned away by high street lenders to secure a mortgage,” Downey explained.
“While we are working in a volatile environment with policy changes and rate fluctuations, the expertise and support that we’ve had from our brokers have been invaluable, and will remain to be in the current mortgage environment and beyond.
“Specialist lenders will be crucial and I expect to see the specialist lending market take a healthy share of the pie over the next 12 months. Combine this with a likely new government - who I hope will prioritise housing initiatives, I’m hopeful we will start to see more positive change into 2025.”
READ MORE: Specialist lender boosts sales team with new BDM
How big an issue is housing today?
Like many in the industry, Downey is clearly keen to see how housing will feature in the party manifestos produced in the run up to the next general election. A rapid turnover of housing ministers has frustrated mortgage professionals who want to see a meaningful, long-term commitment to addressing housing need.
“We’ve seen housing become one of the most important issues in this country,” Downey noted. “However, acting on this requires a vision with a sustained long-term approach and policy that will create a stable housing market.
“We need to see the focus shift to help first-time buyers make their first step onto the housing ladder. Whether that’s affordable housing initiatives such as relaxing planning laws on housing developments, cutting stamp duty, or introducing deposit schemes, these will ultimately all contribute to supporting prospective first time buyers achieve their homeownership goals.
“However, the most important change we need to see is an equilibrium between supply and demand for housing.”
Downey highlights evidence that, in 2023, only 178,000 new homes were built in the UK, despite a target of 300,000 properties.
“We can’t predict the outcome, but it is going to be interesting to see how each party proposes their priorities and solutions for the housing market,” she anticipated.
