Spring has certainly been in the air recently and it too feels as though we have turned a corner and begun a new phase for the mortgage market.

We’ve now seen the lifting of the very last of the Covid-19 restrictions, but also rising inflation that is creating a cost-of-living crisis and leading to successive rises in interest rates from the Bank of England. Could this mean that the low interest rate world we’ve lived in since the 2008 global financial crisis is at an end?

All this change undoubtedly creates concern amongst borrowers, and it requires all of us in the mortgage sector to assess what it means for the future of the mortgage market. There are clearly headwinds that we must face up to in 2022, but if there is anything the pandemic proved, it’s that our sector has a fantastic ability to be resilient and adapt to change.

A healthy start

After the end of the stamp duty holiday, there were concerns that the final months of 2021 would be far quieter for the mortgage market. Yet we saw strong demand in Q4.

Q1 this year has been no different. Whilst as a club we did not continue the trend from last year where every quarter was bigger than the last, lending remained strong, 6% up on Q1 2021. Remarkable when we remember that this year, we have not benefitted from a stamp duty holiday. So, where is this demand coming from?

Alongside a strengthening of the buy-to-let market, there has been a clear shift towards remortgage and product transfer activity. Over the coming months and into 2023 we expect to see the remortgage market as a key demand driver.

For brokers, this presents an excellent opportunity to deliver valuable advice to customers. The latest figures from Google search show that there has been a 400% rise in searches over whether mortgage rates will rise. A strong focus on contacting and looking after existing clients will be critical.

A resilient market

How likely is it that this strong demand will continue? There are certainly challenges, with the biggest being the rise in the cost of living.

The figures are stark. Recently, economists at Experian estimated that a combined impact of rising energy and food prices, the increase in national insurance and the removal of the £20 Universal Credit uplift, as well as rising interest rates, could add nearly £4,500 a year to the average household expenditure. Add to this the rising cost of building materials, a construction skills shortage that will only impact the number of new properties coming onto the market, and the potential for further supply chain issues with China now back in lockdown, and the picture seems quite uncertain.

However, the mortgage market has so far remained resilient. This could be because those with mortgages, including fixed-rate options, are more likely to react when they feel the true impact of rising costs, rather than forecasts, or perhaps those with mortgages or access to mortgages are impacted proportionally less than those on lower incomes. Yet, whether it is the buyer interest estate agents are continuing to see or searches by advisers through our SmartrFit research tool, the indicators of demand are still there.

New expectations

While the uncertainty remains, what is clear is that we have moved into a an environment where rates rise, a new experience for many people.

Are the days of long-running low-rate deals now over? It certainly seems as though repricing is a daily occurrence as lenders try to find the balance between swap rates, lending volumes and service levels. We must try to avoid a repeat of some of the challenging situations we saw with service in 2020 – patience must remain the order of the day, and I commend those lenders who remain committed to offering reasonable time scales when withdrawing products.

For advisers, the new market also means new trends need to be considered. In fact, our latest research shows that borrowers are taking a more proactive approach to their mortgage needs and Google search data shows a 3,500% increase in those searching for a broker nearby. Many are researching mortgages well before speaking to an adviser – in some cases up to three weeks before making contact – and advice clearly remains important.

This makes it all the more vital that advisers consider and boost their online presence. Updating websites and building up social media activity can all play a part. I am seeing some advisers do this fantastically well. Those who ignore these trends could be left behind.

Welcome steps

Finally, I’m sure we have all been warmed by the UK public’s reaction to the Ukrainian refugee programme. For the mortgage market, the terrible situation in Ukraine might seem like a purely political issue, but contacting existing customers could be useful for advisers to ensure they are aware of any clients planning to help out.

Lenders will need to know about any client’s plans to house refugees as guests or tenants, and I want to commend the response from the majority of lenders who appear to be accommodating such requests.