It’s common for mortgage activity to drop as we head toward the end of the year, but a host of brokers have told Mortgage Solutions that things are even quieter than usual, with warnings that it’s not clear how long this situation is likely to continue.
Shutting up shop
Malcolm Davidson, director at UK Moneyman, said that Christmas has come early for the mortgage market, but not in a good way.
“The number of people searching for mortgage advice online had dropped to typical ‘December’ levels by mid-October, so I would think most brokers are now seeing the effect of that in their submitted business levels,” he said.
Davidson suggested that lenders who have already hit their lending targets may be devoting the remainder of the year to getting on top of their service levels, “which have been woeful for the most part of 2022, without investing in the technology or underwriters they need going forward”.
Mike Staton, director at Staton Mortgages, noted that many lenders don’t want to lend at the back end of the year, which is why there have not been significant reductions in rates lately, before “open season” starts in January.
He continued: “I think we will see a lot of rate reductions and lenders coming back to the market, wanting a good start to 2023. My advice to a lot of my clients is to weather the rest of the storm that has been 2022 and look at reviewing your situation at the beginning of 2023.”
The mortgage market has gone into hibernation, according to Lewis Shaw, owner of Riverside Mortgages, and it’s unclear how long it’s likely to last. He reported a “definite slump” beyond the usual quiet period, with most new business now being remortgages.
He added: “With talk of property price crashes and a recession set to last for up to two years, it’s hardly filling people with confidence.”
Proving a broker’s worth
Scott Taylor‒Barr, financial adviser at Carl Summers Financial Services, said that there had certainly been a drop in purchase business, with prospective buyers hoping for falls in both mortgage rates and property prices.
He added: “Remortgage business has, however, picked up during the latter part of the year and we expect a lot more in 2023, with lots of five-year fixed rate deals maturing. I’m already speaking to clients who have deals ending in May 2023 to start the review process, ensuring they have time to properly discuss their options and weigh up the cost implications for them of, no doubt, higher interest rates.”
Taylor-Barr pointed out that this also meant accommodations could be made for lenders still suffering back logs, as well as the “woeful service” from some conveyancers.
Anil Mistry, director of RNR Mortgage Solutions, said that the usual slowdown in purchase applications was more significant this year than in years past.
He added: “Certain lenders now allow product transfers to be secured up to six months in advance, so I have seen more activity in this area than at this time last year. It seems apparent that borrowers want to secure a new rate quickly, rather than wait until a month before it ends.
Elliot Cotterell, director of Windsor Hill Mortgages, noted that business volumes at the tail end of 2021 were significant, and did not really let up over the festive period.
He continued: “I can remember securing mortgages all the way through the Christmas period due to the demand.”
This hasn’t been the case in 2022, though he suggested that the current uncertainty “gives us as advisers more of an opportunity to show our worth and guide clients through uncertain times”.
However, Riz Malik, director of R3 Mortgages, noted that while it normally gets quieter the closer we get to Christmas, that hasn’t been the case this year with the number of enquiries actually increasing.
Malik said this would help make up for “the two months we effectively lost after the mini Budget Bermuda Triangle”.
What comes next?
Davidson was pessimistic about the prospects for service levels in 2023. He argued that if lenders do not invest in their back-end systems and staff, then “come mid-February when the pent-up demand comes to fruition, they will be struggling again”.
He added: “My advice to lenders would be to get on and cut rates now to smooth out the service curve. These customers aren’t going away, they are simply playing a waiting game.”
Shaw noted that there will still be buyers looking to move, and “huge amounts” of remortgage business next year, but warned that we have not yet seen the true impact of the cost of living crisis or the hikes in mortgage rates.
“That will show up come summer 2023 and I suspect it’ll make for grim reading,” he continued.
Mistry suggested that in the first half of next year, at least, there will be greater remortgage and product transfer business than purchase applications.
He continued: “Once potential buyers see how the property market is, then we could see purchase applications increase in the second half of 2023.”
