January is behind us and, from our perspective and, I suspect, that of many advisers, it has been something of a month of two halves.
There’s no denying 2023 kicked off relatively slowly, however as the month progressed, we saw a growing level of activity, with mortgage applications showing both day-on-day and week-on-week increases, and in a significant uptick particularly over the last seven days which we anticipate will continue into February and beyond.
As is understandable, we’re all trying to get a handle on what the year will deliver, what the purchase, remortgage, and product transfer (PT) mix, might be, and what might allow us to be even more optimistic for the next 11 months.
Returning activity boosting confidence
Certainly, lender activity – particularly in the residential space – has continued to grow through the month. There was a dipping of the toe in the water in terms of product rates and changes early on, and again as the month progressed, more lenders were willing to fully immerse themselves in the market and it has clearly seen a sizeable number of rate changes and new products launched.
There was anticipation going into the year that 2023 would look much more like 2019 than 2021 and 2022, with housing transactions down materially, albeit with both remortgaging and product transfer (PT) activity holding firm, and likely increasing.
As you will no doubt know, Intermediary Mortgage Lenders Association (IMLA) forecasted gross mortgage lending of £265bn this year, while UK Finance was slightly more optimistic at £275bn.
However, a number of lenders we’ve heard from recently, feel somewhat less bullish, and this has much to do with the continued fall-out from the mini-Budget.
As we know, there was a significant reduction in mortgage activity and applications in the immediate period post-mini Budget, and that being the case and as completions now tend to take five to six months to work their way through the pipes, the market is likely to see dampened completion numbers in February, March and April this year.
This may well mean that annual mortgage lending of £265bn to £275bn is a stretch, and some lenders and distributors talk of £250bn or so, although this doesn’t include PT business, of course.
Issues to iron out
Certainly, the mini-Budget has a lot to answer for in terms of the shift it precipitated in the mortgage market.
Recently, Governor of the Bank of England, Andrew Bailey, said we were still suffering “something of a hangover effect” because of it, and that while market conditions had normalised, rates were still clearly higher than they were before the disastrous Budget and we, of course, as a sector, and particularly borrowers, will have to live with that for some time to come.
In my last article, I talked about the reasons to be optimistic for the year ahead, and they are still there, particularly in terms of the demand for advice, and the fact that many people will want to use advisers to see exactly what is available to them beyond the confines of their existing lender.
For us, we can help mitigate any potential drop in purchase business, with support that can help drive business and income in other areas. That means providing better tools to access opportunities such as protection or general insurance, or to make sure that all existing clients are serviced well and that when they come to renew, they are always coming back to the original adviser.
There are billions of pounds of mortgage business coming up for renewal in 2023, and recent history tells us that a large amount of this could end up down the PT route.
I don’t need to tell you that most lenders pay a significantly smaller proc fee for this business, despite the adviser typically carrying out the same amount of work as a remortgage, and therefore not only do we need to urge lenders to level the playing field in this area and – in a competitive market – we need to make sure mortgage advisers fully consider the remortgage options for clients who may be pre-disposed to simply choosing the lender’s PT offer.
January was encouraging in terms of new business levels rising nicely, but advisers and firms need to stay focused on customer communication and relationship building with old and new clients – as many consumers will forget the value of advice and drift back to their existing lender for ease.