Just after emerging from the pandemic, inflation has created a cost of living crisis, restricting consumer spending power. Caution was heightened further following last September’s mini Budget, which shook the confidence of the housing market and caused a spike in mortgage rates.
While lenders and markets have since calmed, borrowing costs remain elevated due to repeated hikes to the Bank of England’s base rate.
As customer needs evolve in line with these unprecedented conditions, in combination with the emergence of hybrid working and reintroduction of stamp duty, brokers and lenders are presented with new opportunities for growing their business.
Easing borrower worries
Intermediaries can play a crucial role in dispelling the complexity of market conditions and consumer anxiety around affordability. This may be particularly valuable for younger customers, many of whom have likely not experienced the current cost of living pressures and high interest rates.
Indeed, according to recent research, younger generations have become particularly vulnerable to financial pressures.
Hargreaves Lansdown has estimated that millennials and Gen Z will make up just under two-thirds (61 per cent) in the number of people at risk of facing higher remortgage payments this year. In this context, reassurance from brokers and lenders in relation to financing, market uncertainty, and the mortgage journey is critical for providing quality service in the current economic environment.
For first-time buyers (FTBs) entering the property market, intermediaries also have an important role to play in raising awareness of the different options available to them. Millennials are generally buying fewer homes than previous generations, frequently prioritising their careers over settling down. Meanwhile, Gen Z often regards owning a home as an unobtainable aspiration due to a lack of credit history, savings, and burdensome student debt.
The intermediary relationship is arguably more important for this younger generation of buyers, for whom buying a property now seems like even more of an uphill struggle than any other market segment.
Brokers and lenders who are capable of building trusted relationships with their younger clients and clearly explaining the viable paths to home ownership can unlock valuable opportunities for future growth.
A new way of thinking
Product innovation on the part of lenders is also key to catering to evolving client needs.
This is crucial for growing sections of the housing market such as the self-employed. Under normal circumstances, many within this group often choose not to apply for a mortgage due to fear of rejection, and now face even greater challenges as the economic picture becomes increasingly uncertain.
According to the latest Mortgage Broker Tool Affordability Index, affordability for self-employed mortgage clients has declined to its lowest level since the index began in 2020, with only 65 per cent of self-employed mortgage enquiries considered affordable at the end of 2022.
For lenders serving the self-employed, it is critical that they seek to tailor their offerings and that brokers work to identify the optimal deal for individual customer circumstances.
Connecting online
Finally, as customers become more cautious in their outlook, it is important that intermediaries seek to cultivate their online presence. Engaging with customers via new marketing channels, such as social media, can help to build awareness of suitable offerings and provide greater clarity as market conditions appear progressively complex.
Intermediaries that work to understand the preferred social platforms for reaching different demographics and strengthen their brand by regularly publishing useful content can expect to uncover exciting opportunities in the digital age.
While the mortgage market has undoubtedly faced exceptional challenges over the past few years, opportunities for growth are available to those who maintain quality personalised service, continually seek to innovate, and readily embrace new channels of communication.
