After more than a decade of record-low interest figures, we now find ourselves talking about rising rates once again.

For years, we’ve said that the low-rate world could never last forever, and today, with inflation now at its highest level in 40 years, it’s becoming clear that we’ve reached that turning point.

However, the pandemic showed us that we have a resilient mortgage market, and I believe this is yet one further challenge we can face up to as we continue to meet the needs of borrowers up and down the country.

Rising inflation is clearly a major source of concern for many, hindering the affordability of borrowers from first-time buyers to growing families. It’s also having an influence on the practices of mortgage lenders too.

Increases in the base rate and inflation levels have led to a rise in lenders’ funding costs. In part, this has caused lenders to quickly withdraw products, but in extreme cases we’ve even seen market volatility and rising funding costs forcing some to amend or withdraw their pipeline of offers altogether.

I understand the challenges facing lenders, particularly those reliant on securitisations, but it is vital that we find ways to avoid this disruption if we are to maintain the trust of brokers and their customers.

Navigating the ebbs and flows of the lending landscape

For the larger lenders, all looks positive. At Legal & General Mortgage Club, we’ve seen the share of lending from the ‘top six’ lenders climb from 62% at the beginning of 2021 to 71.6% at the end of April 2022.

This jump was largely fuelled by the ability of these lenders to harness retail deposits, which ultimately is positive as it results in more competition and better deals for customers.

However, while better deals are good news on one hand, these increased lending volumes have been causing service issues for both advisers and borrowers. This has often resulted in frequent rate changes and product withdrawals, meaning that service capacity is struggling to keep up with funding capacity. More focus required here, please.

True specialist lenders have also remained buoyant, with many on our lending panel growing by over 25% so far this year, as they provide solutions for those who may fall short of the affordability criteria to access high street rates.

For many consumers, recent events have heightened their financial complexity and specialist lenders, as well as advisers, have since capitalised on this area.

For others, the landscape looks less favourable. For those lenders relying on securitisation markets to guarantee their capital, volatility has caused headaches, with some days seeing swings of 0.15% on swap rates.

For these lenders, keeping an eye on funding costs is tricky and satisfying funders is no easy feat, let alone having a smaller pond to fish in as the larger lenders take greater share. As such, some lenders have prioritised margins over volume, and offered a limited product range, waiting for more stable times to return.

For a few, these challenges have exposed certain weaknesses, having been forced to make last-minute revisions to offers near completion or reassess their rates and arrangement fees at short notice. When the tide goes out it becomes clear who’s struggling to keep up and this is not a situation that helps anyone in our market.

Navigating these rate changes and last-ditch product withdrawals have placed significant pressure on the advice brokers give to their customers. Advisers not only have to keep up with all of the current changes but are tasked with providing advice in a market that is constantly evolving, which is naturally frustrating, and, at times, extremely challenging. A big thank you to all advisers out there battling for your customers.

A varied and stable lending market benefits us all

Ultimately, it is in all our interests to have an extensive range of lenders that cater to the varying needs of all customers.

For this to remain a reality, we need to be confident that the lenders across our panel will provide a great home for the customers advisers are bringing through the door. To this end, we’ve been upgrading our own due diligence processes for lenders and we’re actively engaging in conversations with all lenders to understand their position at the moment.

Having a broad and varied range of healthy lenders is vitally important for our market and the consumers we serve and having the confidence to recommend them to customers is perhaps even more important. This is essential as living costs rise and borrowers’ financial situations become increasingly complex. These borrowers need more choice and variety to ensure they can find a solution that matches their revised circumstances.

We are seeing signs that the financial markets are beginning to settle and let’s hope that stability brings more lenders back to competitive positions.

For advisers, ensuring that you’re taking advantage of the right technology and research tools to identify appropriate lenders is crucial. These tools can help match those more complex cases and ensure that borrowers with a wide range of needs are able to secure a place on the property ladder. Additionally, the business case for adopting technology is hard to dispute, as tech both reduces the administrative burden and allows you to focus on what you do best – sharing valuable advice with your customers.

We all have a part to play in ensuring a competitive mortgage market, and it is imperative that we work together – lenders and brokers – to handle case volumes and deliver for customers.

Kevin Roberts, director, Legal & General Mortgage Club