I firmly believe building societies are as well placed as any other kind of lender in the UK market to play a centre stage role in helping borrowers navigate these tricky financial waters.
If 2022 seems like a dream now (or a nightmare), we can all be agreed that by the end it left borrowers in many instances reeling from the combined impact of rising rates and a parallel cost-of-living crisis.
Inflation had been unleashed earlier in the year, and the Bank of England had already moved to stifle it before Liz Truss unleashed her infamous mini-Budget and sent mortgage costs soaring.
In its wake, there is a lot of speculation about the trajectory of interest rates over the coming months with most commentators predicting rates settling between 4% and 5% over the year. Inflation remains a concern but at the time of writing a diminishing one.
Even if the housing market cools a little, and there is no guarantee it will everywhere, we may yet see rates fall further as lenders begin to compete for the attention of loans and borrowers.
Borrowers will be in desperate need of sound advice. If mortgages were confusing before (if for no other reason than the sheer number of products out there) then understanding and making a good decision now will be even more so.
The sudden change to a new norm has been as bewildering for many as it has been unexpected. Individual circumstances and attitudes to risk will make the difference to personal choices but borrowers’ wishful thinking (or fear of tackling escalating mortgage costs) mean they may need to hear the reality of their situation from a third party who can really help them. Brokers’ advice and their role in this respect is irreplaceable.
What we do know in the aftermath of the last quarter of 2022 is that average fixed rates have been falling slowly since the UK economy was steadied.
And while fixed rates will always have the appeal of certainty, a discounted variable rate might still prove better for some borrowers.
Many tracker and variable rates offer the opportunity to save money compared to fixed forms of finance. Brokers will have their work cut out making sure their clients get the right outcome – enshrined in the FCA’s new Consumer Duty regulation.
As a national lender, we know not all areas of the country experience the difficulties of a cost-of-living squeeze, rising costs of borrowing, and unemployment in the same way and to the same extent.
Regional trends matter and understanding local markets is important – just ask our team of business development managers who are never slow to point out the opportunities and challenges not only in our own heartland but across the England and Wales.
It is important because we lend nationally on a broad range of products for everyone from first-time buyers to self-employed, to landlords and expats.
All these buyers face similar and often very different issues that often require a more thoughtful approach.
Like many smaller building societies, we can afford to take a more pragmatic approach to underwriting that allows flexibility and responsible lending where many others simply cannot afford that kind of discretion.
This too is incredibly important right now when sources of income, even for the most straight-forward prospects, are numerous and erratic.
Collectively, it’s the job of building societies to make sure we help people for the long-term. In the last few months funding costs have soared, curtailing the aspirations of many lenders to be ‘in’ the market and for some, 2023 may present similar challenges.
The size of the market may be reduced but for borrowers and their brokers, who are prepared to shop around, there are options and we are proud to be one of them. All Societies have an opportunity to make an even bigger difference this year, whether it be in price, criteria, or service. I know we are resolved to do so.
Tracy Simpson is head of lending at Cambridge Building Society
