2022 has definitely been a year of two halves. In February, the UK Government lifted the legal requirement to self-isolate if you tested positive for Covid-19 and things began to get back to some kind of cautious normality.
The threat of the virus was (and still is) there, but it seemed we had learned to live with it and, as most people got vaccinated, there was a sliver of positivity in the air which was in turn reflected in the housing and mortgage markets.
People started buying and selling homes again. Competition in the mortgage sector, historically low interest rates and Government incentives such as the stamp duty tax reductions, the furlough scheme and the mortgage guarantee scheme all played their part too, as both house prices and property transactions rose by dramatic levels not seen for more than a decade.
Demands on us as a lender and those in conveyancing ramped up too, as we managed the influx – which we did.
The holiday let market in particular was extremely buoyant, with people still not confident in jumping on a plane for their annual holiday, so the demand for UK holiday accommodation increased and many took advantage of that by investing in a holiday let. At Hodge, our holiday let mortgage DIPs reached record levels too.
Then came the summer – increasing energy and fuel prices, inflation on the rise, a new Prime Minister and THAT mini-Budget – and we all know what’s happened since.
I think I’d be safe in saying the Budget caught most lenders by surprise, and while we expected rates to rise due to the increasing inflation, the speed of that rise led to the turbulence we all saw and the subsequent withdrawal of mortgage products across the board.
The uncertainty in funding mortgages took some time to recover, therefore, with the bigger banks and building societies maintaining a certain degree of market presence with limited range, while specialist, smaller and niche lenders such as Hodge removed all products and took longer to get back to offering either a limited range or back to a normal range offering.
We also increased our affordability stress testing alongside the cost-of-living expenditure going up to ensure we were all protected during this difficult period.
There was a stark difference in the cost of funding a two-year fixed rate mortgage to that of a 5-year fixed, where for a period of time, the curve was inverted.
Which meant market rates offered on the two-year term lengths were being priced higher than that of 5-year, when traditionally they are the other way round.
At Hodge this has meant we’ve seen the money available to spend on mortgage lending or holidaying has decreased massively, and this in real terms has meant customers are unable to afford the same level of mortgage, and now combine this with the higher overall interest rate, it’s a difficult time.
We expect this trend to continue as customers look for a period of stability. Thankfully we’ve seen a level of stability return but with customers facing much larger bills and increasing costs we, along with lenders and intermediaries, are ready to support customers through a difficult period.
So, what we would reiterate to our customers, is if they do find themselves in financial difficulties, talk to their lender. They’re there to help and most will do so, if you reach out to them.
And if you’re a Hodge customer or have a client who is a Hodge customer in difficulty, please get in touch.
Our motto is to be there in the moments that matter – that’s just as relevant in the difficult moments as it is in the good.
Dave Landen is CEO of Hodge
