The latest mortgage lending statistics have simply confirmed what we already know. According to the Bank of England, the number of monthly mortgage approvals has fallen 40% in the past 12 months – the monthly figure for the same time last year was 120,000. The number of available mortgage products has also fallen by 40%. More than 500 deals were withdrawn on 2 April. Moneyfacts said that since the beginning of March, 2,932 mortgage products have been withdrawn, leaving only 4,794 available. And on a different measure, Trigold claimed that 23,000 products had been removed in the last six months.
To make matters worse, rates have also been rising. Whereas two years ago, the average two-year fixed-rate mortgage was priced at 4.96%, today it is 6.09%. The harsh truth is that money, be it retail or wholesale, is less freely available and is more expensive than it has been in the past.
Market drive
But there is a need to keep these depressing statistics in perspective. You would be forgiven for thinking that the mortgage market has come to a grinding halt, but that is far from the truth. There remains a substantial amount of business being written. In February, 111,000 remortgages were approved. The figure was down from 118,000 in January, but shows this is hardly a stalled market.
The Council of Mortgage Lenders (CML) expects £90bn of net new lending this year, which, even compared with the bumper £105bn written last year, will not be a bad result. Consumer borrowing through loans and overdrafts increased by £2bn in February and is rising at its fastest rate for five years. This increase is undoubtedly supported by the reduction in the availability of cheap mortgage funds, which is forcing some consumers to turn to alternative sources of finance. Clearly, consumers’ appetite for borrowing has not yet been dampened and the CML estimates some 2.8m borrowers are due to re-mortgage in 2008 and 2009. The supply of money might be tight, but demand remains strong.
There is plenty of opportunity for brokers to help consumers find the right finance deal and the need for advice and guidance in a rapidly changing market is greater than ever.
Although there may only be a fraction of the number of mortgage products to choose from, there is more than enough to confuse the average homeowner. With loan-to-value (LTVs) being restricted and criteria being tightened, borrowers need professional help to find suitable deals.
The number of loans and overdrafts being taken out also indicates there is an increasing percentage of borrowers who need help not only to find the most competitive mortgage deal, but also to put their finances in order. Never has there been a greater need for professional financial advice. A greater number of cases will not go through to completion and brokers will not be able to help some clients, especially those with impaired credit records. But it is not be impossible for brokers who are willing to seek out the business that is there to be done.
The challenge for brokers is to ensure their businesses are broad based and not concentrated in vulnerable sectors of the market. This is not a time to be focused on sub-prime or self-cert lending. These sectors will not provide such rich pickings in the near future. On the other hand, full status borrowers with equity in their property who are looking to re-mortgage or move home are the type of clients brokers should be tracking down.
We work in a market where borrowers will need far greater support, be checked more carefully, from a credit perspective, and where it will be harder to find and place mortgage applications. Brokers will continue to be an important source of new business for lenders and a source of impartial and professional advice for borrowers.
Life might be tougher, but we still have a market worth working in. n
