Lenders required to be more creative to attract business
New figures from UK Finance reveal a slight fall in mortgage activity for home purchases, largely driven by affordability pressures, particularly in London and the southeast as borrowers struggled to pull together big deposits and prove they have the income to support substantial mortgages. Concerns over the ongoing Brexit saga and high stamp duty at the upper end of the market have also combined to prevent people from moving.
It doesn’t look as though the market will change significantly this year with most predictions suggesting the same level of lending will be done. Yet all the lenders we speak to want to do more lending. The challenge for them will be to stand out from the competition – not everyone can offer the cheapest rates so tweaking criteria, while not falling foul of the regulator, will be another option. We expect more innovation from the smaller players, targeting those borrowers who may be struggling to get the funding they need, perhaps because they’ve missed a mobile phone payment or similar.
Encouragingly, there has been some growth in buy-to-let, particularly in the North. This sector has been badly hit by tax and regulatory changes and we hope that the Chancellor doesn’t use next week’s Budget to impose further penalties.
Consumers are taking advantage of cheap mortgage rates when refinancing and releasing some equity to pay for home improvements or to clear more expensive credit card debt. This is a prudent approach as long as borrowers appreciate they will pay more interest in the long run if they don’t make regular overpayments to reduce the balance on their mortgage.
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