Brokers have named rate rises, supply of housing and income multiples as top concerns among their clients.  

Last week, the Bank of England increased the base rate by another 25 basis points to 1%, the highest level since 2009. The increase also marked the fourth base rate rise since December 2021. 

The BoE’s decision was unwelcoming news for people who already face the cost of living crisis.  

Your Mortgage Decisions co-owner Dominik Lipniki says: “We have so many clients that have not experienced interest rate rises before because we have been in a period of low rates for so long.” 

“A lot of people are panicking, especially because we know lenders increase their rates by a lot more than the BoE increase in the base rate, so there’s a real increase in mortgage cost.” 

When it comes to interest rates, Lipnicki says: “You need to have an honest discussion with clients to explain to them what will happen if rates go up when their fixed rate ends and help them find the right option. For example, is it worth signing up for longer even if it’s a little bit more expensive now because rates could continue to rise?” 

As the pace of change in the mortgage market has seen rates rise significantly, L&C Mortgages associate director of communications David Hollingworth explains: “Many borrowers will be eager to lock their rate in now and will often want to start their remortgage sooner than they may normally.” 

“For advisers, the challenge is often keeping customers aware of all the changes in an effort to secure a rate before withdrawal, which can come with very little notice,” he adds. 

Feeding into the matter of affordability will be the rising cost of living as customers deal with higher energy, food and fuel costs, impacting lender affordability calculations. However, Hollingworth says “so far that doesn’t seem to have posed any major problems”. 

Commenting on affordability, Lipnicki says: “Previously, clients were more driven by monthly costs, but they’re now looking at long term stability. For example, long term fixed rates. In the past, it would be really rare for a client to want a 10-year fixed rate because it would be a long time to commit to something but now we are seeing that more than ever.” 

In response to the changing market trends, lenders such as Newcastle Intermediaries announced last month it will introduce a 10-year fixed-rate mortgage product.  

Meanwhile, Virgin Money also launched three new fixed-rate deals and cut the price for one of its longer-term mortgages earlier this year. 

The three products included a seven-, 10- and 15-year fix. At the time of the announcement, Virgin Money national sales manager Richard Walker said: “There’s a clear market for long-term fixed rates from borrowers who value that payment security.” 

Another factor that those looking to buy will have to contend with is a market that is in low supply. Hollingworth says buyers will be faced with stiff competition from other buyers for any good quality property that comes to market.  

He explains: “That may mean entering into something of a bidding war and could mean buyers are seeking to stretch their borrowing in order to give themselves a chance of securing a property.” 

The ongoing concerns around the cost of living increases aren’t going to go away but Hollingworth says “rates are still at low levels historically which should help advisers support their customers”. 

Landlords also have the same concerns as non-investors around interest rate rises, inflation and economic uncertainty.  

However, Mortgages for Business sales director Jeni Browne says that it is overlayed with “nervousness around a tenant’s abilities to pay rent as they too, will be stretched by living costs”. 

In addition, landlords face the challenge of the minimum energy performance certificate (EPC) changes coming in, which Browne says is “accompanied by any real lack of clarity around this, the abolishment of Section 21 and the changes outlined in the Levelling Up For Landlords 2022 white paper announced by Michael Gove in February”. 

In March, it was revealed that just one-third of privately rented homes have an energy efficiency rating of C or above. 

Specialist property lenders Octane Capital said this means just 1.6m homes out of a total of 5m have an EPC, which measures a property’s energy efficiency, of C or above. 

Browne comments: “As a broker, we are reviewing our clients’ portfolios to lock in rates where possible and thus shield them from further rate rises in the mid-term.” 

“Going forwards, we need to be abreast of the EPC requirements and the products available to assist landlords to meet these – lenders are really starting to gear up for this so we, as brokers, can really help our landlord clients,” she adds.  

Concerns have also been raised around the length of time is it taking to get mortgages approved and the protracted nature of achieving legal completion. 

Private Finance technical director Chris Sykes notes that a lot of lenders have large wait times of 10 days plus to underwrite a case or view documents at the moment, which he says “is making already nervous clients sometimes more nervous”.  

“In some circumstances at the moment I’ve been quoting clients the best rate, but then an alternate proposition with a lender that has shorter timescales,” Sykes says. 

However, London Money director Martin Stewart explains that this needs to be addressed by the broker in terms of managing client expectations.  

“There are too many advisers whinging about the process and not enough advisers working with the wider industry to solve the issues which, in some respects, we are helping to create,” Stewart comments. 

Elsewhere, concerns around income multiples that lenders use to determine the size of the mortgage they can offer you have been raised. In February, Nationwide increased the maximum loan to value (LTV) on its Helping Hand mortgage, allowing borrowers to apply with just a 5% deposit. 

Nationwide’s Helping Hand offers first-time buyers the ability to borrow up to 5.5 times their income when taking out either a five- or 10-year fixed rate. Previously this product was only available up to 90% LTV. 

Commenting on this, Franklin Murray Financial Services mortgage broker Serena Franklin says: “This is extremely helpful but home movers need the same income multiple. I look forward to this being extended to home movers and those remortgaging.”