This is our take on what is currently happening in the mortgage market. Our views are often cited in several national publications, including; BBC News, The Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of key trade publications, so this should keep you ahead of the curve. If you have any questions on any of these stories, or would like further information, please do not hesitate to get in touch.

  • Is inflation and rising energy prices going to lead to much needed housing stock coming to the market?
  • First-time buyers less London centric
  • Borrower affordability to be constricted by rising cost of living

Is inflation and rising energy prices going to lead to much needed housing stock coming to the market?

The UK is experiencing a cost-of-living crisis; inflation is at record levels and set to surpass 7% by April, the energy price cap set to be increased in April with 18 million plus households set to pay on average £693 or 54% more and all the while wages are stagnating. House prices however are at record highs and this unique situation presents a dilemma for many homeowners, especially those in the older demographic, who may consequently look to sell in the coming weeks and months. The costs of downsizing were a prohibitive factor for many older homeowners, but with pensions and incomes not rising anywhere near in line with inflation and potentially larger and older houses costing significantly more to heat and run this could push people to put their houses on the market where they otherwise would not have. Good news for those who have been in housing limbo who sold their property during the pandemic and have been unable to find one to purchase.

  • While this cost-of-living crisis affects all but the most affluent homeowners, we suspect we will see a rise in older borrowers and equity release mortgage enquiries in the coming weeks and months to combat these rises in another way, raising money to help bolster pension incomes.
  • While the Government would of course not want to see a cost-of-living crisis brought on in no small part due to the cost of energy, which includes fossil fuels such as gas, it could be a significant driving factor to people making more sustainable choices when it comes to their homes and inadvertently help the country take a step towards reaching national emissions targets. We believe we will not only see a shift towards buyers looking at properties with higher EPCs (A, B and C) which in turn will lead to these properties commanding a premium and lead to significant growth in demand for green mortgages, we will also see capital raising and remortgaging to make homes more energy efficient.

First-time buyers less London centric

While a number of major employers have publicly announced a return to the office, the situation is more nuanced and for now most employers are still offering a degree of flexibility for their employees and a hybridised working model. It is this flexibility that is leading to First-Time Buyers and young professionals considering options much further afield than before and notably in other urban areas as opposed to the much-publicised countryside race for space, as while these young professionals often have London salaries and are well remunerated, but still priced out of the Capital. For instance, we have had clients who fit this demographic buying in Manchester, Norwich, Birmingham, and Coventry in January.

  • Will a number of these borrowers become accidental landlords in the future as employers seek a return to the status quo and they are forced to move back to London and the South-East? To get a mortgage so far from their work some lenders require a letter from their employers, but others are happy with the client’s confirmation they are in a flexible role with no contracted office time anymore.
  • We have also seen this on an international level, with some clients moving abroad due to their flexible roles allowing them to work from anywhere.

Borrower affordability to be constricted by rising cost of living

Lender’s affordability calculators are in part defined by data from the ONS (Office for National Statistics) and once this data reflects the rising costs of living, especially post-the removal of the energy price cap in April we can expect that this will mean tighter affordability for some and lower loan amounts available than previous.

  • This could reduce peoples maximum borrowing, which in turn could be a problem for those already in a tight situation, those who need to remortgage who were borrowing at the extent of their capacity may be forced to product switch instead of move lenders and getting the best rate in the market and lastly with house prices at record highs it could be more bad news for first-time buyers.
  • There will be a lag to any changes in affordability calculators, we see changes coming in likely in June or July to reflect ONS data from April / May.
  • We may see this offset in part by the governments ease on requirements for lenders to apply high interest rate stress tests to their mortgages, if lenders choose to adopt this remains to be seen.
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