This month we sat down with Charles Roe (pictured), director of mortgages at UK Finance. He has worked for UK Finance in the role for around three years and before that was chief risk officer at Nottingham Building Society for around two years.
Prior to that, Roe worked at Grant Thornton for nearly three years as director of its financial services group and before that worked at the Financial Conduct Authority (FCA) for nearly six years, most recently as head of department for mortgages and mutuals.
Q: The mortgage market has been very volatile over the past few weeks, even months. Do you think this will continue and where do you think inflation and the base rate will settle by the end of the year?
A: Although we saw inflation fall, it’s future trajectory remains unclear, so it’s difficult to predict these things. Economic forecasters have predicted that inflation is likely to remain above target next year and we may well still see the base rate continue to rise to bring inflation back down.
Whatever the circumstances, the sector knows the effect this can have on homeowners. Help is always available and customers just need to get in touch with their lender to discuss the options to help.
Q: Brokers have been increasingly frustrated with last minute product withdrawals, what do you make of calls for a minimum notice period of 24 hours for withdrawals?
A: We understand the impact of last-minute withdrawals on both brokers and customers.
Unfortunately, movements in swap rates are outside the control of lenders and when there are changes, lenders may have to pause or withdraw products to manage servicing capacity and the funding allocated to the fixed rates deals on offer.
Changes to product ranges are time critical, but mortgage availability remains strong across all loan to value (LTV) bands.
Q: UK Finance figures from last year showed that remortgages and product transfers are expected to grow this year, is this a segment of the market that will be increasingly important for brokers and what should they be mindful of?
A: Given the 2021 stamp duty holiday, the number of fixed rate deals scheduled to end this year is fairly high – around 1.5 million across the whole of 2023 and 1.6 million in 2024.
With the rise in mortgage rates, customers could find their affordability stretched and will increasingly seek the advice of mortgage brokers to help them navigate the options available to them.
Q: Recent UK Finance figures show that interest-only stock is continuing to fall, do you think that will continue or will the Mortgage Charter’s ability to switch to interest-only reverse this trend?
A: The switch to interest only, as outlined in the Mortgage Charter, is on a temporary basis with an automatic reversion to capital and interest payments over the remaining life of the mortgage.
As the Mortgage Charter interest-only option is temporary in nature, we do not anticipate the long-term reduction in the number of outstanding interest-only mortgages to stall.
Q: The government has recently issued the Mortgage Charter, with 90 per cent of the mortgage market now covered. Does it go far enough, and should there be other measures taken?
A: The Mortgage Charter formalised much of the support that was already available to mortgage borrowers. All lenders will offer support to customers struggling with their mortgage payments.
The Mortgage Charter provides some additional reassurances, but it’s important to stress that all mortgage providers have teams of experts who will be able to provide tailored support for each borrower’s circumstances. The level of arrears and possessions remain very low, this shows that the support available is working.
Q: There are a few longer-term fixed rate providers coming into the market, what are the barriers to 20 to 30-year fixed rates becoming more mainstream and do you think they will grow in popularity?
A: The market is competitive and innovative, and quick to respond to demand. However, demand for these products is typically very low – customers are generally reluctant to fix for longer periods because interest rates might move, or they might have changes in circumstances.
There’s nothing in the regulatory rules that prohibits longer-term fixes but without demand, lenders haven’t at the moment developed more of these products.
Q: There has been a lot of coverage around the buy-to-let sector and how it is struggling. What do you think the biggest challenges are and how can they be addressed?
A: High rents caused by a supply and demand imbalance, and high borrowing costs have resulted in a challenging time for both tenants and landlords. Local Housing Allowance rates have been frozen since 2020, so an increase to current rental levels could help many of the most vulnerable renters.
Lenders are able to offer forbearance to landlords who are concerned about their mortgage payments, based on their individual circumstances.
Q: Net zero and EPC legislation are two big changes to the market. Do you think the market is doing enough to prepare for this and what more can be done?
A: UK Finance and the industry are doing a huge amount of work to support homeowners and landlords with their transition to net zero. But not all of the housing stock is mortgaged and so lenders have a limited reach.
We encourage the government to signpost the expertise available and help homeowners, landlords and tenants with the cost of greening the UK’s homes – for example, offering stamp duty rebates for homeowners to upgrade their home within two years of purchase, or developing a one-stop shop for Net Zero advice so that homeowners can obtain impartial and unbiased information on how to make their homes more energy efficient.
Q: Overall, what are your expectations for the mortgage market in the next 12 months?
A: Looking at the number of fixed rate deals maturing over the next 12 months, lenders and brokers will be very busy helping homeowners secure the best products for their individual circumstances.
With interest rates likely to remain high, this will stretch affordability for first-time buyer and those moving up the housing ladder, which is where the advice sector can play a key role.
The cost of living challenges, although they may reduce, will still be there. However, with a potential General Election coming up, I’m sure all parties will be thinking about new, key policies for the housing sector.
