The housing and mortgage markets are set for an interesting summer. In stark contrast to this time last year, activity levels from a purchase perspective are expected to be significantly lower.
The reasons for this are very apparent as borrowers are no longer incentivised by the stamp duty holiday and personal finances are currently being placed under far greater scrutiny due to rising living costs and lingering economic uncertainly.
Inevitably, a string of interest rate hikes and rises in swap rates are also generating higher borrowing costs which, in turn, are tempering demand. However, it’s certainly not all negative news for lenders, advisers and borrowers.
Leading into the summer months, activity levels remained strong. Data released by HMRC outlined that, on a non-seasonally adjusted basis, transactions in May 2022 increased to 100,870, 1.6% higher than the previous month and only 2.0% lower than in May last year. Meanwhile, non-residential transactions came to 10,250, representing a 9.7% increase compared to May 2021 and 0.4% higher than in April this year.
This data comes on the back of a recently released Bank of England (BoE) report which outlined that the value of new mortgage commitments made by lenders in the first quarter of this year came to £82.5bn.
This was 6.7% more than in Q4 2021 and 6.6% greater than the value committed in Q1 2021. Breaking this down, the BoE said that 86.6% of advances in the first quarter of this year were made for owner occupiers, with 50.7% of these for purchase.
Of these, 21.4% were made for first-time buyers (FTBs), a 0.5% fall on last year and a 1.9% decrease since Q4 2021.
Focusing on the FTB sector, this is likely to be one of the most closely monitored lending areas in Q3 as spending power and savings pots are being tested by rising inflation levels which have just hit 9.1%. And with the BoE issuing the warning that inflation could reach 11% this year, this will lead to even greater pressure being placed on people’s finances across the UK.
Thankfully, we’re operating in a competitive lending environment which continues to meet an array of FTB needs. Many of these are emerging from specialist lenders who offer a more flexible, manual underwriting process which can support FTBs across a variety of borrowing scenarios.
For example, here at The Loughborough for Intermediaries, we lend on shared ownership, right to buy, joint borrower sole proprietors and we also have a family assist range. Within these, we can lend to a range of borrowers, even those with a chequered credit history through to those with more complex incomes.
This highlights an array of options which FTBs really need on the back of a few tough years which have impacted the finances of the UK population in a multitude of different ways.
Looking ahead, the summer months are likely to be challenging ones for some FTBs. What they, and the adviser community, need to remember is that options do remain available. Options which may lie beyond the restraints of the more traditional FTB channels.
Ashley Pearson is national BDM at The Loughborough for Intermediaries
