The start of any new year holds the promise of what is to come and what can be achieved.
However, if you look at recent predictions and forecasts about what might happen in the UK mortgage market, there is certainly a focus which at best, errs on the side of caution, and at worst, takes a distinctly glass half-empty view of 2024.
Two significant forecasts were issued just before Christmas – from both UK Finance and IMLA – which I think could safely be assessed like this, and while I do not question their validity or their soundness, it does make me feel slightly out of kilter with their prevailing views, not least because I sense this year could see a marked improvement on last.
First, let’s get to how we are likely to have ended 2023, namely with £225.5bn (IMLA) and £226bn (UK Finance) of total gross lending which includes £30bn (IMLA) or £28bn (UKF) of buy-to-let lending, plus a significant £240bn of product transfers (IMLA)/£219bn (UKF) on top.
That is a significant market in anyone’s book but is clearly down on 2022, and this might well lead the two organisations to look somewhat differently at what 2024 might bring.
For what it’s worth, IMLA suggests gross lending will be £205bn this year and £210bn next; while UKF opts for a slightly more positive £215bn/£216bn.
Without being an expert in this area, my view tends to believe/hope that 2024 will deliver more than this, and I sense there is a degree of caution from these two bodies not least because they over-estimated 2023’s figures.
At the same time last year, IMLA said gross lending was likely to be £265bn in 2023 while UKF were more positive again at £275bn. The fact the actual figure was some £40-50bn less than this is somewhat understandable because I would guess neither forecast author(s) were anticipating inflation to remain so high for so long, or the subsequent need to keep raising interest rates.
Increased rates clearly impacted on market activity, not least purchasing, but also remortgage business given the affordability issues each borrower would have faced as a result of this higher rate environment.
So, perhaps the remit this year was to be rather more circumspect in that regard, however I think there tend to be rather more green shoots right now which point to a rosier mortgage garden in 2024 – certainly when compared to the market after the Spring last year.
Clearly, the tide has been turning on rates, and judging by current swaps and market expectations regarding Bank Base Rate (BBR) there is an anticipation that mortgage pricing can continue to track lower. That opens the door for many would-be purchasers who have sat on their hands through 2023 unwilling to act or indeed unable to meet affordability criteria.
Secondly, I’m anticipating some big-ticket Government ‘giveaways’ for housing stakeholders, likely to start in March’s Budget and potentially comprised of stamp duty cuts, plus more incentives and potentially schemes particularly for first-time buyers to help get them on the ladder.
Combined we might well see some pent-up demand unleashed and more activity than those gross mortgage lending forecasts believe possible. There is also the rather large aspect of the need for mortgage lenders to fill pipeline and to have a mortgage book which significantly beats 2023.
Many lenders announced fairly large falls in lending for 2023 at the end of the year, and there will an urgency in not repeating this. This remains a highly competitive market space – particularly in the lower loan-to-value (LTV) product areas – and as a result, as we have seen recently, the domino of falling rates, coupled with a need to look elsewhere for business, can only be good news for borrowers.
And intermediaries? IMLA believes the broker market share of gross mortgage lending to be up at 87% and predicts it will get to 90% in two years. However, this is clearly not the case for PT business, which has dominated the market, particularly as existing borrowers have had nowhere else to go.
A market which gives their clients more remortgage options, plus one that sees purchase activity stimulated, is going to be much healthier for advisers, not least because they’ll get a full procuration fee for this business from lenders rather than the lesser one provided for the vast majority of PT business.
Overall, therefore, while I understand a slightly reticent approach to 2024 from these two trade bodies, I tend to think we’ll have a healthier year to look back upon once we jump forward 12 months’ time.
Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International
