The mortgage market has become increasingly complex and difficult for borrowers and brokers to navigate due to a number of factors.
The ongoing cost-of-living crisis combined with high interest rates is squeezing affordability, leaving two fifths of UK adults worse off by an average of £215 per month, compared to 12 months ago. Additionally, advancements in technology mean that clients now expect and demand information at the click of a button.
However, this represents a significant opportunity for brokers to tune into their clients’ needs and position themselves as the helping hand who can guide them through these challenging times and help them achieve their homeownership goals.
Affordability Squeeze
Stubborn inflation coupled with the rising cost-of-living is having a significant impact on people’s homeownership ambitions, with many potential homebuyers finding it harder to save for a down payment or manage monthly mortgage payments.
Our own research found that nearly half (49%) of mortgage holders are concerned about the impact of the inflationary environment on monthly payment, while over a third (35%) of those looking to buy a home are worried about saving for a deposit.
Additionally, a third (33%) of all UK adults are apprehensive about how the current economic climate will impact their future homebuying prospects.
These constraints often eat away at their purchasing power, making it harder for brokers to write business while causing some clients to fall behind on their monthly expenses.
The latest figures from the Registry Trust reveal that the total number of judgments registered against consumers increased by 15.7%, from 193,670 in Q3 2022 to 224,152 in Q3 2023.
Specialist Support
As affordability challenges continue and a growing number of existing and would-be borrowers face financial difficulties, signposting will be more important than ever.
Setbacks such as missed payments can trigger high-street lenders to turn away a borrower because they don’t fit the traditional credit profile. However, this is where the specialist lending industry has a vital role to play. By adopting a manual approach to underwriting, we can base lending decisions built on customer needs and work with brokers to understand real affordability for people, even if they have struggled financially in the past.
Open Banking
Innovation in technology is also driving the industry forward. Open Banking is set to transform the future of the mortgage market, particularly in areas of affordability and expenditure patterns. By securely sharing financial data between banks and third parties, Open Banking streamlines the application journey, resulting in faster customer outcomes.
Open Banking also enables lenders to gain a granular understanding of a customer’s financial circumstances, improving financial inclusion for disenfranchised customers. This includes those who have found it difficult to prove they can afford a mortgage, such as those with complex credit or multiple income streams.
While this technology benefits both consumers and brokers, eliminating the need for paperwork, improving risk assessment, and facilitating better lending decisions, Open Banking’s full potential will only be realised if we all work collaboratively to improve awareness and understanding. For brokers this means educating their clients on the benefits of Open Banking, while lenders need to be as transparent as possible about their technology when it comes to supporting brokers and their clients along the mortgage journey.
Looking ahead
Undoubtedly there will be further challenges ahead, but brokers are well placed to help their clients weather the storm and achieve their homeownership goals. A key part of this will be communicating regularly to coach their clients through these challenging conditions as well as signposting them to the support available. Whether a borrower has complex credit or a blip in their credit history, there are always solutions out there, and it’s our job as an industry to make them aware of their options.
Reece Beddall is sales and marketing director at Bluestone Mortgages
