Following the end of the stamp duty holiday on 30 September, there is an expectation that house purchase mortgage volumes will calm down and remortgage activity will increase as borrowers try to take account of the remarkable deals that are available.
However, it is also likely that house price appreciation will now slow.
It is important that positivity in the originations side of our lending industry is considered alongside other factors that could affect us in another way – the potential for a rise in arrears cases.
Financial challenges for borrowers
There are an estimated one million people still furloughed. The full impact of this ending is yet to be known, albeit numbers of people on this scheme have dropped steadily month-on-month this year without too much adverse effect on overall arrears figures so far.
We also have the £20 Universal Credit uplift scheme finishing on 6 October.
Although on the face of it you may think this won’t affect too many mortgages, there are a significant number of employees that have their household incomes supplemented by Universal Credit and so this will undoubtedly have some sort of effect. The extent of this impact needs to be considered by lenders and those third-party service providers who manage mortgage books on behalf of lenders.
This week Andrew Bailey, the governor of the Bank of England, admitted he thinks we are in for a potentially rocky road, with inflation heading towards four per cent and therefore there is a likelihood of a rise in rates before the end of year.
If this does happen it will put significantly more pressure on borrowers, many of whom have never experienced rates rising. Intermediaries may therefore see an uptick in people looking to remortgage to find lower rates to help with affordability.
Lender feedback for some time now, has been that there is a steady rise in the number of borrowers facing hardship and requiring assistance. Conversations with attendees of this week’s Global ABS Conference in London also reflected this.
Furthermore, recruiters are reporting that recruitment in the area of debt collections has increased dramatically over the past 12 months.
We should therefore, as an industry, assume that arrears levels across the mortgage industry in all product areas will increase, but to what extent remains to be seen.
It will be important that lenders and loan servicers focus on this area over the coming months and be ready for increased credit issues. Intermediaries should also be prepared for more calls from borrowers with increasing amounts of adverse credit.
