2021 marked 33 years for me in the mortgage industry and I think I’d be hard pushed to recall another one so unusual.
Some words to describe it might be – Confusing. Refreshing. Frustrating. Contradicting, but, on the whole, upbeat. Then again, it’s probably not too different to the last few years!
But we did get back to doing some normal stuff, working in the office, meeting people, fancy dinners and attending events. I managed to get my flip flops out and spend a couple of long weekends in the sun. But enough about that. Here are some of my reflections on last year and predictions for 2022.
A look back at last year
All three of the stamp duty deadlines increased lending to record levels. If you were an adviser, you were probably very busy over those periods. If you were a lender, you probably hit record-breaking volumes too.
Interest rates were at their lowest ever. Lots of lenders changed LTIs to help first-time buyers. House price increased again and again and BDMs got back out on the road (I’m pretty chuffed about that one).
The intermediary market also grew to over 80% of the mortgage market. If you look back over the last five to seven years, that’s about 8% to 10% growth, which is a significant testament to the value of advice.
What’s on the cards for 2022?
Talking of the value of advice, I personally believe it’s never been more important for people to get it. If you think about it, you can get any information at your fingertips in seconds. There are loads of products and options and everywhere you look there’s an expert view, often offered by people who haven’t got a clue.
Add to the mix Covid, first-time buyers, house price increases, interest rates, help to buy, joint borrower sole proprietor and your head spins. So, for anyone who’s looking for a mortgage, there’s only one answer in my view, and that’s to get advice.
Interest, affordability and house prices
The market was forecasting up to 1.25% by the end of 2022. The big question is – will it get that high?
We’re reading reports about increases in inflation which might suggest an early increase. But what happens if we see the unwinding of QE increasing the cost of borrowing for banks and building societies, which might increase mortgage borrowing rates without us seeing as many base rate increases.
Combine increases in inflation with a forecast 3% increase in average earnings compared to last year and unemployment running significantly lower than expected, which all points towards a more affluent consumer base.
Many are forecasting a continued increase in house prices throughout 2022, as well. Some market data suggests around 3%, although that could vary significantly from lower increases in London and the south and greater increases in the North.
Remortgage and product transfers
We know there are significant balances coming to the end of their terms in 2022. So how will the PT market play out? Lenders will no doubt be as keen as Brokers to speak to borrowers whose terms are coming to an end, so knowing your client base is really important. How frequently do brokers check in with their clients? If the last advice you gave them was two, three or five years ago and you’re waiting that long to speak to them again – how strong is that relationship?
Income, affordability, family, employment and protection needs don’t usually match the ‘term cycle’ of their mortgage and they change all the time. So, if you’re not talking to them every year to see how things are, why not?
Sustainability and green lending
This one’s here to stay. It’ll be interesting to see how it plays out. For me it’s as much as the consumer ‘wanting’ to take responsibility for the environment in which they live and work as well as our industry driving change.
If we can get more people to become more accountable then we will start to see more interest in how we, as an industry, can support greener homeownership. Whether it’s retro fitting an existing property or purchasing a new one.
We cannot allow a ‘two-tier’ market to develop with those who can afford to be ‘greener’ benefiting from better products and rates whilst those who can’t, end up with more expensive options.
I don’t have all the answers and it’ll take us all to be better joined up with house purchase, advice, lending and supply of ‘greener materials’ to enable a seamless value chain to be created and for the consumer to get what they need.
As I said from a sustainability perspective, I don’t think only starts with the lender, the broker, the industry or communities – it must also start with the individual. They have to accept and want to become responsible for their contribution to the green effort, and I think it’ll take time to build momentum in that area.
Many of us will have seen some of the recent insight into the distance needed to be travelled in our industry. Make no mistake there are serious cultural, societal and commercial sanctions for not upping the pace and ‘leaning in’ to Diversity and Inclusion challenges.
Those of us who have been around for some time (refers back to his 31 years introduction) have a clear obligation to make ourselves and those around us more accountable. If we don’t lead the way who will?
Ambitions for the future
At Skipton we’re in growth mode right now. We’re increasing our BDM team (field and telephone) and continuing with our aspiration to become a top 10 lender. We’ve also created a new role designed to make sure criteria and policy change is up to date, accurate and more dynamic as we exit the world of Covid.
We’ve invested a lot in tech over last two or three years, too. AVM, auto ID and electronic income verification to name but a few. And we’ll continue to invest and improve in our technology, so it helps to streamline what we need from the adviser and complements our BDM relationships.
Paul Fenn, head of business development, Skipton Building Society For Intermediaries